At Ascent Wealth Solutions, we believe choosing how to borrow is often just as important as choosing what to invest in. The borrowing method drives your cost, your risk, and what happens if the strategy does not go to plan.
Rates below are indicative only, at the time of writing, and are not offers of credit.
The four main ways Australians borrow to invest are: against the family home, against an investment property, through margin lending, or via internally geared managed funds and ETFs.
1. Borrowing against your home
Often a lower-cost borrowing option.
- Security: your home.
- Consequence if it fails: you can lose the investment and still owe the loan. If the shortfall cannot be repaid, the family home is exposed.
- May be more appropriate for: homeowners with strong equity, stable income, suitable risk capacity and a long-term plan.
2. Borrowing against an investment property
- Security: the investment property.
- Consequence if it fails: you can lose the investment property. If the sale does not cover the loan, you may still owe the shortfall. Provided the loans are structured separately and the home has not been used as a guarantee, the home is not directly on the line.
- May be more appropriate for: investors who want home and investment debt structurally separate, subject to their borrowing capacity and risk profile.
3. Margin lending, secured against shares, ETFs, or managed funds
Usually a higher-cost borrowing option.
- Security: the underlying shares, ETFs, or managed funds.
- Consequence if it fails: if markets fall sharply and a margin call cannot be met, the underlying investments may be sold to repay the loan.
- May be more appropriate for: investors who understand market volatility, margin calls and the possibility of forced selling.
4. Internally geared managed funds or ETFs
Borrowing sits inside the fund at institutional rates, currently in the low to mid single digits, plus a management fee. Total cost may be below retail margin loan rates, depending on the fund and fee structure.
- Security: internal to the fund.
- Consequence if it fails: there is no personal loan and no margin call at investor level. Risk is limited to the amount invested.
Investors remain exposed to amplified market movements and may experience greater volatility and losses than an equivalent ungeared investment.
- May be more appropriate for: investors seeking leveraged growth exposure who understand the additional volatility, risk of loss and product complexity.
Cashflow is what actually decides the strategy
Whichever method is used, the interest still has to be paid every month in every market. Rate rises, softer rents, and reduced dividends over recent years have illustrated that reality.
A key consideration is stable, surplus cashflow that has been modelled against higher rates, softer income and investment volatility before borrowing.
If cashflow is only “just enough” after modelling higher rates and softer income, the strategy may not yet align with the investor’s risk capacity and cashflow position.
Turning strategy into practical planning
For some investors, gearing may form part of an overall financial strategy where cashflow capacity, risk tolerance and investment objectives have been carefully considered.
If you would like to work through which method may fit your situation, you are welcome to book a complimentary 20-minute call.
Frequently Asked Questions
What are the four main ways to borrow to invest?
Australians commonly borrow to invest by using equity in their home, borrowing against an investment property, using a margin loan, or investing through internally geared managed funds or ETFs.
Which borrowing option has the lowest risk?
Every borrowing method carries risk. The most appropriate option depends on your financial goals, cashflow, borrowing capacity and tolerance for investment risk.
What is a margin call?
A margin call occurs when the value of investments securing a margin loan falls below the lender’s required level. Investors may need to contribute additional funds or assets, otherwise investments may be sold.
General Advice Warning
General information only. This article does not consider your personal circumstances. Please seek personal financial advice before acting.
This article is not tax or credit advice. Tax outcomes depend on your individual circumstances and current law. Interest rates referenced are indicative only, at the time of writing, and are not offers of credit. Please seek advice from a registered tax agent for tax matters and a licensed credit provider for credit matters.
Disclosures: Stephanie Yeung is an Authorised Representative of Personal Financial Services Limited ABN 26 098 725 145, AFSL 234459. Article prepared July 2026.
