First, let's look at equity. Equity is the difference between the value of your home and the amount that you owe on the mortgage.
For example, if your home is valued at $1,000,000 and you still owe the bank $400,000 then you have $600,000 in equity.
In this example, you could use the $600,000 in equity to borrow and buy an investment property. How does it work?
Lenders will usually loan up to 80% of the value of an investment property, requiring you to fund the remaining 20% plus stamp duty and legal fees.
However, if you have your own home then you can use the equity in your home to "guarantee" the remaining 20% plus legal fees - allowing you to borrow the full amount without the need to contribute any extra cash.
This can be achieved either by approaching your current lender and requesting a cash-out loan against your home so that you can use the cash-out to fund the 20% + fees of the investment property or by refinancing your home with a new lender and having that lender also finance the investment property at the same time.
Both methods have advantages and disadvantages so it is best to talk to a mortgage broker to ensure you get the right advice.
This is a great way to fund that first investment property and begin to grow your wealth. In fact, if you have the equity and can service the loans then consider getting two or more investment properties.
Just a word of warning - be aware that borrowing 100% + fees will result in a larger loan. Be sure that the expected rental income is sufficient to help you cover the costs of servicing the investment loan and be sure to keep a buffer for those rainy days when your property is vacant.