How a Paid-Off Home Can Help You Borrow More for Your Next Property

Owning your home outright is a huge achievement. Beyond the peace of mind it brings, a paid-off property can also be a powerful tool to grow your wealth. Many homeowners don’t realise that their equity can unlock opportunities for investment, giving them access to finance for a second property or even the start of a portfolio.

Here’s how banks see it – and how you can make it work for you.

1. Equity as Leverage

When you’ve fully paid off your home, you’ve built 100% equity. Lenders see this as a safety net, which lowers their risk and increases your borrowing capacity.

For example, if your home is worth $1.2 million, a bank may allow you to borrow up to 80% against it – meaning you could potentially access $960,000 to fund another property purchase without selling your home.

Of course, how much you can actually borrow will also depend on your borrowing capacity and ability to service the loan. Banks will still assess your income, expenses, and financial buffers before deciding the final loan amount.

2. Lower Loan-to-Value Ratio (LVR)

A paid-off home often means your new loan will have a lower overall LVR, which banks love. The lower the LVR, the safer the loan looks to the lender, and the more competitive the rates and features you’re likely to receive.

This makes you more attractive to banks compared to someone with high debt levels.

3. Improved Serviceability

Because you don’t have a mortgage repayment on your existing home, your serviceability looks stronger. Even if your income isn’t high, removing that major expense improves your cash flow in the eyes of the bank. Combine this with potential rental income from your new investment property, and your application becomes even more appealing.

4. Options to Release Cash

Banks give you flexible options when you hold strong equity. You can:

• Refinance your home to release cash for a deposit.
• Use equity directly as security for your next purchase.
• Set up an offset account or redraw facility to manage cash flow strategically.

This flexibility allows you to structure finance in a way that aligns with your long-term investment goals.

5. Building a Property Portfolio

A paid-off home doesn’t just help you buy your next property – it can be the cornerstone of a property portfolio strategy. By carefully leveraging equity, you can step into multiple properties over time, using rental income and capital growth to expand without overextending yourself.

If you’d like to explore strategies, check out our guide: NSW Investor Loan Strategies for 2025: What Banks Want to See.

Final Thoughts

A paid-off home isn’t just a milestone – it’s a powerful financial tool. By unlocking equity and showing banks you’re a low-risk borrower, you can borrow more, secure better loan terms, and step into property investment with confidence.

At Truth Group, I help homeowners turn their hard work into opportunities. As both a mortgage broker and buyer’s agent, I can guide you in securing the right loan and the right property to match your goals.

If this is something you’d like help with, reach out today by booking a discovery call below – and let’s create a strategy that works for you.