What is equity and how do I use it to buy more property?

Total equity = current property value - outstanding loan balance. A $1M property with a $700K loan has $300K equity. But banks won't let you borrow against all of it - they cap useable equity at 80% LVR ($800K) minus existing loan ($700K) = $100K available without LMI, or higher with LMI.

Equity-pull mechanic: refinance to a higher loan amount, withdraw the excess as cash. The $100K useable equity becomes a $100K deposit + costs for the next purchase, plus your existing $700K loan stays in place. You now have two loans against one property until the new property's loan starts.

Cross-collateralisation risk: some lenders structure the new loan with both properties as security, simplifying application but giving the lender control over both at any future stress point. Standalone-security structure (each property independently) is safer but slightly more complex paperwork.

Practical limits: equity-pull capacity depends on serviceability + DTI cap for the combined loans. The bank tests serviceability for the higher combined loan at APRA buffer rate; if cashflow doesn't pass, you can't pull as much. Multi-property investors often hit the DTI ceiling before they hit equity availability.