Using Equity to Your Advantage

Many homeowners are aware they’ve built equity in their property, but not everyone realises how much is truly accessible for other financial goals. 

What is equity?
Equity is the difference between the value of your property and what you owe on your home loan.

Example:

• Property value: $800,000
• Loan balance: $500,000
• Total equity: $300,000

Usable equity
While you may see $300,000 in equity, most lenders will only allow borrowing up to around 80% of the property’s value without requiring Lenders Mortgage Insurance (LMI).

Using our example:

• 80% of $800,000 = $640,000
• Current loan = $500,000
• Estimated usable equity = $140,000

This is the portion that may be available to support your next financial move, subject to lender approval and your ability to service the loan.

How can you use equity?
Equity can be a powerful financial tool when used strategically:

• Purchasing an investment property – use equity as a deposit without saving a full cash amount
• Renovations or upgrades – improve your home or increase property value
• Debt consolidation – roll higher-interest debts (credit cards, personal loans) into your home loan for potential savings

Things to consider
Borrowing against equity still increases overall debt. Lenders will assess your borrowing capacity, and market conditions can affect property values. Careful planning and a clear strategy are key.

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Bottom line
Understanding the difference between total equity and usable equity is essential. Knowing how much you can realistically access allows you to make informed decisions for investment, renovations, or other financial goals.