Use Property as Collateral? Unlock Cash Fast (2026)

If you're considering leveraging the value of your property to secure a loan, you're not alone. Many Australians find themselves needing to unlock the equity in their property for various reasons, whether it's to fund a renovation, consolidate debt, or make a significant purchase. However, the process can be complex, and it's crucial to understand how using your property as collateral works, the risks involved, and how to navigate the process to ensure you're making the best financial decision.

Understanding Using Property as Collateral

Using your property as collateral, commonly known as a secured loan, means that you are offering your property to the lender as a security for the loan. If you fail to repay the loan, the lender has the right to seize your property to recover the outstanding debt. This type of loan is generally considered less risky for lenders, which often results in lower interest rates compared to unsecured loans.

In Australia, secured loans can range from home equity loans to refinancing your existing mortgage. The key is to ensure that the equity in your property is sufficient to cover the loan amount you wish to borrow. Equity is calculated by subtracting any outstanding mortgage balance from the current market value of your property.

Current Market Rates and Requirements

As of 2026, interest rates for secured loans in Australia generally range from 6.49% to 12%, depending on the lender and your individual financial situation. The Reserve Bank of Australia's monetary policy, lender competition, and your creditworthiness are key factors influencing these rates.

To qualify for a secured loan using your property as collateral, lenders typically require:

• A minimum equity of 20% in your property
• Proof of a stable income
• A good credit score
• Comprehensive property valuation

Different lenders may have varying criteria, which is where the advantage of consulting with a mortgage broking company like Esteb and Co becomes evident. With access to 83+ lenders, they can help identify the most suitable options based on your circumstances.

Steps to Use Your Property as Collateral

Here's a step-by-step guide to help you through the process of using your property as collateral:

1. Assess Your Equity: Calculate your property's current value and subtract any outstanding mortgage to determine your available equity.
2. Check Your Credit Score: Obtain a copy of your credit report to ensure it's accurate and address any discrepancies.
3. Consult with a Mortgage Broker: Engage with a broker like Esteb and Co to explore different lender options and interest rates.
4. Choose a Lender: Based on the advice and options provided, select a lender that offers the best terms for your situation.
5. Submit an Application: Prepare and submit all required documentation, including proof of income and property valuation.
6. Review the Loan Offer: Carefully examine the loan agreement, paying attention to the interest rate, fees, and repayment terms.
7. Finalise the Loan: Once satisfied, sign the loan agreement and proceed with any additional steps required by the lender.

Expert Tips and Considerations

Before proceeding, consider the following expert tips:

• Understand the Risks: Remember that if you default on the loan, you risk losing your property. Ensure you have a solid repayment plan in place.
• Consider Future Property Value: Property markets can fluctuate, impacting your equity. Factor in potential changes in property value.
• Beware of Over-Borrowing: Only borrow what you can comfortably repay to avoid financial strain.
• Seek Professional Advice: Financial decisions involving property can be complex. Consulting with professionals like those at Esteb and Co can provide clarity and peace of mind.

Frequently Asked Questions

• Can I use my investment property as collateral? Yes, you can use an investment property as collateral, but lenders may impose stricter terms compared to a primary residence.
• What happens if my property value decreases? A decrease in property value can affect your equity and potentially impact your ability to refinance or access additional funds.
• Is using my property as collateral better than an unsecured loan? It depends on your financial situation. Secured loans typically offer lower interest rates but carry the risk of foreclosure.
• Can I use multiple properties as collateral? Yes, some lenders allow you to use multiple properties to secure a larger loan, which can provide greater borrowing power.
• How does refinancing work if my property is collateral? Refinancing involves replacing your existing loan with a new one, usually to obtain better terms or access equity. The property remains as collateral.
• Are there tax implications? Interest on loans used for investment purposes may be tax-deductible. Consult a tax advisor for personalised advice.
• What if I have a mortgage on my property? You can still use your property as collateral, but the existing mortgage will be factored into the equity calculation.