Home equity is the difference between your property’s market value and your remaining home loan. Most lenders allow you to access up to 80% of your property’s value without paying Lenders Mortgage Insurance (LMI).
You can use home equity for renovations, investing, or helping family, but accessing it usually requires refinancing and increases your total debt.
What Is Home Equity?
Home equity is the portion of your property that you truly own. It is calculated by subtracting your remaining home loan balance from your home’s current market value.
As your loan balance decreases or your property value rises, your equity increases.
Home Equity Calculator
Disclaimer: This calculator is to be used as a guide to help you better understand your options. We have not assessed what options are suitable for your needs or if you meet other lending criteria that would allow you to access your equity. Any repayments quoted above are calculated using your current home loan balance over a term of 30 years. We strongly recommend that you make additional repayments and pay your loan off sooner. If you borrow over 80% of the property value, then you may pay an LMI premium.
The property equity calculator simply deducts the balance on your home loan from the estimated value of your home. Keep in mind that you can borrow only up to 80% of your home equity. Not sure how much your property is worth? We have written a guide to help you estimate the value of your home, so you can follow the guide to enter your property’s value in this calculator.
How Much Equity Can You Actually Use?
Even if you have high equity on paper, lenders usually cap borrowing at 80% of your home’s value. This protects borrowers and banks from market downturns and avoids LMI costs.
Example Scenario
- Property value: $1,000,000
- Maximum lend at 80%: $800,000
- Current loan: $600,000
- Usable equity: $200,000
Why Is Home Equity Important?
For most Australians, home equity is their largest financial asset and a major wealth-building tool when used strategically.
Key Benefits Of Home Equity
- Fund renovations that increase property value
- Purchase investment properties
- Consolidate higher-interest debts
- Help children with a home deposit
Australian homeowners hold record levels of tappable equity, driven by strong price growth in capital cities over the past year.
How Can You Access Your Home Equity?
Accessing equity usually requires refinancing or restructuring your loan. The method you choose affects cost, risk, and long-term flexibility.
Here’s a Step-by-Step process of how equity release works.
- Your property is re-valued by the lender
- Your borrowing capacity is assessed
- A new loan or loan increase is approved
- Released funds are paid as cash or credit
What Are the Main Ways To Access Home Equity?
| Method | Best For | Key Drawbacks |
|---|---|---|
| Cash-out refinance | Large Expenses | Increases total debt |
| Equity for investment property | Building Wealth | Market Risk |
| Line of Credit | Ongoing Access | Higher Interest Rates |
| Reverse Mortgage | Retirees | Reduces Estate Value |
Lines of credit and reverse mortgages are usually more expensive and should only be considered after traditional refinancing options.
Is Accessing Home Equity Difficult?
Accessing home equity is not difficult if you meet lender criteria, but cash-out restrictions apply and approvals depend on income, credit history, and loan-to-value ratio.
- If your LVR exceeds 80%, Expect LMI or rejection
- If your income has dropped, Borrowing capacity may shrink
- If your property value rises, You may unlock more equity
How Does Home Equity Increase or Decrease Over Time?
Equity grows when property values rise or your loan balance falls. It shrinks when you refinance, withdraw equity, or when property prices decline.
- Make extra repayments to accelerate equity growth
- Avoid using equity for lifestyle spending
- Reassess equity before major financial decisions
Should You Use Home Equity Or Keep It Untouched?
Use equity to acquire assets or reduce higher-interest debt, not for depreciating purchases.
Good Uses
- Renovations that add value
- Income-producing investments
Risky Uses
- Cars, holidays, lifestyle upgrades
- Covering ongoing cash-flow shortfalls
Final Takeaway
Home equity is powerful leverage, but only when used with a clear strategy and repayment plan. We help Australians structure equity-release home loans with competitive lenders and fast turnaround times.
Call us on 1300 889 743 or enquire online to speak with an experienced mortgage broker.