Calculate your current home equity, loan-to-value ratio (LVR), and how much equity you may be able to access for renovation, investment, or other purposes.
Home Equity Calculator
What Is Home Equity?
Home equity is the portion of your property’s value that you actually own — the difference between what your property is worth and what you still owe on your mortgage.
$$\text{Home Equity} = \text{Property Value} - \text{Outstanding Loan Balance}$$
Example: If your property is worth $900,000 and your outstanding mortgage balance is $480,000, your home equity is $420,000.
Equity builds over time through two mechanisms:
- Loan repayments — each principal-and-interest repayment reduces your outstanding loan balance
- Capital growth — if your property increases in value, your equity increases even without paying down debt
Total Equity vs Usable Equity
Not all of your equity is accessible. Lenders in Australia typically allow equity release only up to an 80% LVR — meaning they want at least 20% of the property’s value remaining as a buffer.
Usable equity = 80% of property value − outstanding loan balance
Example:
- Property value: $900,000
- 80% of value: $720,000
- Outstanding loan: $480,000
- Usable equity: $720,000 − $480,000 = $240,000
Even though total equity is $420,000, only $240,000 of it is typically accessible without paying LMI. Some lenders go up to 90% LVR for equity release — but this incurs LMI costs.
How Does Equity Build Over Time?
Through Repayments
In the early years of a home loan, most of each repayment goes to interest. As the loan matures and the balance falls, the split shifts — more principal is repaid each payment, and equity grows faster.
Example — $600,000 loan at 6%, 30-year term:
| Year | Outstanding balance | Equity (assuming no price change) |
|---|---|---|
| Start | $600,000 | $0 (if 100% LVR) |
| Year 5 | ~$561,000 | ~$39,000 |
| Year 10 | ~$514,000 | ~$86,000 |
| Year 15 | ~$453,000 | ~$147,000 |
| Year 20 | ~$371,000 | ~$229,000 |
| Year 25 | ~$256,000 | ~$344,000 |
| Year 30 | $0 | $600,000 |
Through Capital Growth
Property price growth in Australia over the long term has averaged 6–7% per year nationally (CoreLogic data). This means a $600,000 property bought in 2015 may now be worth considerably more — dramatically increasing equity without any additional repayments.
Important: Property prices do not always rise. They can fall, and have fallen significantly in specific markets and time periods. The equity calculation above assumes a fixed property value — actual equity will vary with market conditions.
What Can You Use Home Equity For?
Equity is a powerful financial resource, but using it adds to your total debt. Common uses:
Renovation or home improvement — releasing equity to fund a renovation that increases the property’s value is a common and often sensible use. The equity release increases your loan balance.
Investment property deposit — equity in your owner-occupied home can be used as a deposit on an investment property. This is called “equity as a deposit” and is a common wealth-building strategy. See our using home equity to invest guide.
Debt consolidation — rolling higher-rate personal loans or credit card debt into your lower-rate mortgage reduces monthly payments. However, this should be approached carefully as it extends short-term debt over 20–30 years.
Business investment — some homeowners use equity to fund business ventures. This carries significant risk — the family home is the security.
SMSF property — equity may be used as a deposit when an SMSF purchases property through a limited recourse borrowing arrangement (LRBA).
How to Access Home Equity
There are several ways to access equity in Australia:
| Method | How it works |
|---|---|
| Refinance and top up | Refinance to a new loan for a higher amount; receive the difference in cash |
| Equity loan / line of credit | A separate loan secured against your property’s equity |
| Redraw | If you’ve made extra repayments, you may be able to redraw them |
| Cross-collateralisation | Use your home’s equity as security for a second (investment) loan |
Lenders will require an updated property valuation before approving any equity release, and serviceability must be demonstrated on the new (higher) total loan amount.
FAQ — Home Equity Australia
How do I know what my property is worth?
Options include: a formal bank valuation (required for any equity release), a licensed real estate appraiser, online tools such as CoreLogic or PropTrack, or recent comparable sales in your suburb. Bank valuations are typically conservative and may come in lower than your market estimate.
Does equity count as income?
No. Equity is wealth (an asset), not income. You cannot include equity as income on a mortgage application. However, equity can reduce the LVR on new borrowing, potentially improving your loan conditions.
Can I lose my equity?
Yes. If property prices fall significantly, your equity can erode or disappear. In extreme cases (if prices fall below the loan balance), you may be in negative equity — where the outstanding loan exceeds the property’s value. See our negative equity guide.
Can I use equity to fund my super?
Not directly. However, some retirees use equity through downsizing contributions or through the Home Equity Access Scheme (HEAS) offered by Centrelink, which allows eligible age pensioners to draw down equity as an income stream. See our HEAS guide.
Results are estimates only. Property valuations used in equity calculations must be formally assessed by your lender. Usable equity depends on your lender’s policy, credit assessment, and current LVR. For advice tailored to your situation, speak with a licensed mortgage broker or financial adviser. Find one through MoneySmart.