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What Is Equity?

Your equity is the difference between the value of your home and what you owe on your home.

Think of your equity as the money you would have left over if you sold your home, and repaid your home loan.

How to calculate your equity

Simply deduct your loan amount from the estimate value of your home. We have written a guide to help you estimate the value of your home.

Property value – Loan amount = Equity

For example, if your home is worth $500,000 and you owe $200,000 then the calculation would look like this:

$500,000 – $200,000 = $300,000 in equity

Why is equity so important?

The equity in your home is important! It is usually the biggest asset you have. You should aim to repay your home loan before you retire.

People who have little equity in their property when they reach retirement age, may be forced to either downsize their home or continue working to repay the debt.

Accessing your equity

You can access your equity with a home equity loan. This may be subject to equity release restrictions, also known as cash out restrictions.

The funds released can then be used for any worthwhile purpose including renovating your home, investing in property or consolidating debts.

Please call us on 1300 889 743 or enquire online and one of our mortgage brokers can assist you to access your equity.

Increase your equity!

This is why you should try and minimise unnecessary spending and aim to pay off your home loan as soon as possible. This will also decrease the interest that you pay and save you money as well as increase your equity.

If you are an experienced investor then you can use your equity to help you gear your investments in shares or property to maximise your returns.

  • Brooklyn

    Can I get a cash out from my equity loan?

  • Hi Brooklyn,

    Depending on the purpose of your cash out, your current borrowing and the remaining equity on your property, you could be able to cash out up to 95% of your property value.

  • Reek

    But cashing out equity is risky, isn’t it?

  • Hi Reek,

    Yes, cashing out equity is risky as when your equity loan is advanced by the bank, a large lump sum of money is released directly into your bank account or into a line of credit for you to use later. Once this has been done, the banks no longer have any control over how you use those funds. Banks are concerned that you will not use the funds according to your intended purpose. Some people may use the money to make the loan repayments because they are living beyond their means.

  • Shahi

    I’m Australian but living and working in Laos. I own a house in WA and I want to use its equity to invest in another house there. Don’t need much – around $400k at 70% LVR is okay. Am I okay to do this?

  • Hey Shahi, we can help you with this. We’ll need you full details so we can come up with the best recommendation regarding the lender that can be just right for your situation and loan needs. Please speak with one of our Australian expat home loan specialists by calling our overseas number +61 2 9194 1700 or simply enquire online:
    https://www.homeloanexperts.com.au/free-quote/

  • P Clayton

    What is currently the maximum time period for which we can fix our loans?

  • Hi Clayton,

    You can fix for 15 years but you’ll need to be creative. Some of our lenders can allow you to fixed your loan for up to 10 years. You can then extend your fixed rate by 5 years at the end of the fixed term if you want to fix for 15 years. However, this will depend upon the bank’s policy at that time. If the bank doesn’t allow you to re-fix the loan or charges you high interest rates for it, then you can refinance to a new lender as well.

  • nicholas

    Can I use equity in my home to buy a serviced apartment?

  • Hey nicholas,
    Yes, you can do that. Please check out the serviced apartment home loans page to find out how much you may be able to borrow as well as check out some additional info. Here’s the link:
    https://www.homeloanexperts.com.au/property-types/serviced-apartments/

  • Shawn

    If I own a lot worth $300,000, can I borrow up to 80-90% of that value to build a house on that land? I understand getting it appraised for that value, my question is theoretical. Will it be easier to get the construction loan if the property equity is worth as much or more than the construction loan Im requesting?

  • Hi Shawn,
    Yes you can actually borrow more than the value of the land itself, you can borrow based on the value of the land and total cost of construction using a construction loan.
    However if you’re just using the land equity itself (i.e. borrowing 80% of the value of the land) then we can give you an equity release which you can use to pay for construction without the bank getting involved in the drawdowns. This is easier for you and the builder however it’s an exception to normal lending policy and not all lenders are happy to do this. You have to be in a strong financial position for them to be ok with this. I’ll email you and cc one of our construction experts.