Your home is probably your biggest asset.
It might also be your most underused one.
You've been paying down your mortgage for years - that equity doesn't have to sit there doing nothing. It can be put to work buying an investment property, building a share portfolio, or funding a debt recycling strategy that makes your tax bill a lot less painful.
At Habitat Finance, we've been helping Perth homeowners unlock their equity and invest with it since 2003 - not by handing you a brochure, but by structuring the lending properly so it does what you want without creating a mess to clean up later.
What is home equity -
and how much do you have?
Home equity is the difference between what your property is worth and what you still owe. But the number that matters for borrowing is your usable equity - and that's a bit different.
Most lenders will lend up to 80% of your property's value without requiring LMI. Your usable equity is that 80% figure, minus what you still owe.
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Quick example
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Property value
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$900,000
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80% of value
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$720,000
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Current mortgage
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$400,000
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Usable equity
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$320,000
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That $320,000 is capital you could redeploy into investments - without selling your home or touching your savings. If you bought your home more than three years ago and haven't revalued, there's a good chance your usable equity is considerably higher than you think.
What can you use your equity for?
Buying an investment property Use your equity as the deposit and purchase costs on a residential or commercial investment property - without using your own cash.
Building a share or managed fund portfolio Equity can fund shares or managed funds, with the interest potentially tax deductible if the investment generates assessable income. Your adviser confirms the strategy; we structure the lending.
Debt recycling Progressively convert non-deductible home loan debt into tax-deductible investment debt. One of the most powerful long-term wealth strategies available to Australian homeowners.
Business acquisition or growth capital Home equity can be used as security to access business capital - often at a lower rate than unsecured lending. We coordinate this alongside our commercial lending team.
Debt recycling: Turning your home loan into a wealth engine
Debt recycling is a legitimate, ATO-accepted strategy that - done properly - can dramatically improve your long-term wealth position. It's also one of the most consistently misunderstood strategies in personal finance.
Your home loan is non-deductible debt, the interest doesn't reduce your tax. Your investment loan generates interest that's potentially tax deductible, because it's used to produce assessable income. Debt recycling is the process of progressively replacing the first kind of debt with the second. Same total debt. Very different tax treatment.
Pay down your
home loan
Make regular or lump sum repayments, building redraw availability on your non-deductible loan.
Redraw and
invest
Redraw those funds immediately into income-producing assets - shares, managed funds, or property. Your accountant confirms suitability before you proceed.
Claim the
deduction
The interest on the redrawn investment debt is potentially tax deductible. Use the tax refund to make further home loan repayments. Repeat. Over time, non-deductible debt shrinks; deductible investment debt grows.
Let compounding
do the work
Each cycle converts more non-deductible debt into deductible investment debt, and the investments compound alongside it. Over a ten-to-twenty year horizon, the cumulative effect can be substantial.
Why sequencing matters
The ATO requires redrawn funds to flow directly into income-producing investments - not through an offset or transaction account first.
Common mistakes we structure to prevent:
Commingling
funds
Redrawn money must go straight to the investment, not sit in a general account.
Wrong split
structure
Investment and home loan debt must be clearly separated as distinct sub-accounts.
No documentation
trail
The ATO expects clear records; we ensure the loan structure makes this easy.
Non-income-
producing assets
Deductibility depends on the investment generating assessable income; your accountant and adviser confirm suitability.
Important: Debt recycling involves borrowing to invest, which carries risk. Investment values can fall and you may owe more than your investments are worth. This page provides general information only. Tax deductibility depends on your individual circumstances and should be confirmed by a registered tax agent before proceeding. Habitat Finance does not provide financial or tax advice.
The right lending structure
One of the most common friction points with debt recycling is that circumstances change. With a standard loan, every adjustment means a new application, a new valuation, and more paperwork.
One structure available through our lender panel addresses this directly - a single, adaptable framework with up to 80% LVR, available for up to 10 years, with up to 10 sub-accounts under one limit. It keeps personal debt, investment debt, and tax-deductible borrowings cleanly separated without requiring you to restructure every time your strategy evolves. Ask us whether it suits your situation.
The difference between debt recycling working brilliantly and becoming a compliance headache often comes down to how the lending is set up.
We get that part right before a dollar moves.
Our role: Finance mechanics, not financial advice
Debt recycling sits at the intersection of lending, tax, and investment advice. Here's exactly where each party adds value:
What we do
Structure your home and investment loans correctly. Select the right lender and product. Set up splits, redraw facilities, and sub-accounts to support your strategy long-term. Coordinate with your other advisers.
What your accountant does
Confirm tax deductibility for your circumstances. Review fund flow sequencing for ATO compliance. Manage record-keeping and model the tax benefit.
What your financial adviser does
Recommends which investments the equity should go into and confirms suitability for your risk profile and goals.
Investing
FAQ's
How much equity do I need to start?
As a practical guide, at least $80,000 - $100,000 in usable equity to make a new investment loan worthwhile. For debt recycling, you can start smaller and build progressively. The first step is a quick conversation to find out what you have available.
Is debt recycling legal in Australia?
Yes - it's ATO-accepted and entirely above board when done correctly. The key is that borrowed funds go directly into income-producing investments, with investment and personal debt clearly separated. Done incorrectly, it creates an ATO problem. That's why the structure matters.
Can I use equity to invest in shares as well as property?
Yes. Interest on the equity loan is potentially deductible provided the investments generate assessable income. Your adviser recommends the investments; your accountant confirms deductibility; we structure the lending.
What if my property value drops?
Your usable equity decreases, and in an extreme scenario your lender could require you to reduce your loan balance. We structure lending conservatively - well within 80% LVR - to give you a meaningful buffer, but this is a risk to discuss with your adviser before proceeding.
Do I need to refinance my existing home loan?
Not necessarily. Sometimes we can access equity via a top-up with your existing lender - faster and less paperwork. In other cases, the right structure for your strategy is only available elsewhere and a refinance makes sense. We assess both before making a recommendation.
How long does it take to set up?
A refinance or top-up typically takes two to four weeks from application to settlement, assuming your financials are well documented. A flexible structure with multiple sub-accounts takes a little longer to set up correctly - but the upfront investment saves significant time later.