Last updated: July 2026 · Reviewed by John Pierre Saliba, Director and Mortgage Broker, MFAA Accredited
Using Home Equity to Finance a Major Asset Purchase
If you have equity in your home, you can access it to buy a car, boat, caravan, motorbike or other significant asset, at home loan rates (typically 6–7%) rather than personal loan or dealer finance rates (typically 8–15%). The interest saving over the repayment period can be substantial.
The main trade-off with using home equity for a depreciating asset like a car is that you're securing a depreciating purchase against an appreciating asset (your home). The discipline required: treat the equity drawdown as a separate sub-account and repay it aggressively rather than folding it into your 30-year mortgage. I structure these as separate loan splits so clients can track and repay the asset portion independently.
The Rate Comparison: Home Equity vs Personal Finance
- Home equity rate: ~6.49% p.a.
- Car loan (bank): 8.5–11% p.a.
- Dealer finance: 9–15% p.a. (often higher for used vehicles)
- Personal loan: 10–18% p.a.
On a $60,000 car purchase over 5 years: car loan at 10% costs ~$25,500 in interest. Home equity at 6.49% IO costs ~$19,470 over the same period, a saving of ~$6,000. Repaid aggressively over 3 years, the saving is even greater.
How It Works
- We refinance your existing mortgage or add an equity split loan
- The equity draw is set up as a separate loan account
- Funds are available at settlement, you use them to purchase the asset
- You repay the equity loan separately (ideally faster than the main mortgage)
- No encumbrance on the asset itself, it's free and clear
Lender Policies on Asset Purchases
Most lenders accept vehicle, boat and caravan purchases as a valid purpose for equity release. Some lenders are stricter than others, particularly for luxury assets above $150,000 or aircraft, which may require commercial lending. We match your purpose to a lender whose policy allows it cleanly.
Worked Example: Buying a $75,000 Boat via Home Equity
- Home value: $1,400,000 | Existing mortgage: $600,000
- Usable equity (80% LVR): $1,120,000 − $600,000 = $520,000
- Equity draw for boat: $75,000
- New total loan: $675,000 (48% LVR, comfortably within 80%)
- IO repayment on $75K at 6.49%: ~$406/month
- Marine finance alternative at 11%: ~$1,631/month over 5 years
- Monthly saving: ~$1,225 (IO only, plus principal saving)
The Key Discipline: Repay the Asset Portion Aggressively
The risk with equity finance for depreciating assets is letting the debt linger on a 30-year mortgage timeline. We set these up as separate loan splits with a clear repayment goal, matching or beating the depreciation curve of the asset. If the car depreciates over 7 years, the loan should be repaid in 7 years or less.
