Understanding Usable Equity in Your Property
Equity is the difference between your property's current market value and what you owe on it — but not all of that equity is accessible. Lenders typically allow you to borrow against your property up to a maximum of 80% of its value, without triggering Lenders Mortgage Insurance. This means your usable equity is calculated as: (Property Value × 80%) minus your outstanding loan balance. On a $900,000 property with a $500,000 loan, usable equity is $900,000 × 80% − $500,000 = $220,000.
Accessing equity to purchase an investment property is one of the most common wealth-building strategies for Australian homeowners. Rather than saving a new cash deposit, you use equity from your primary residence as the deposit for the investment loan. For example, $220,000 in usable equity could fund a 20% deposit on a $1,100,000 investment property. This approach requires two loan approvals — the equity release on your home, and the new investment loan — and both are subject to APRA's serviceability buffer of 3% above the actual rate.
APRA's debt-to-income (DTI) guidance creates a ceiling that many borrowers hit before they hit the LVR limit. APRA expects lenders to take heightened care when total debt exceeds 6x gross household income. A household earning $150,000 per year is therefore approaching scrutiny territory at $900,000 in total debt — across both the home loan and any investment loans. This cap can prevent equity release even when the numbers look comfortable on paper.
Frequently Asked Questions
Can I access equity without refinancing?
Yes — a home equity loan or line of credit (HELOC) allows you to borrow against your equity without changing your existing mortgage structure. Most major lenders offer an equity access product where the new facility sits alongside your existing loan, often with a variable rate. Alternatively, if your loan has a redraw facility and you have made extra repayments, you can redraw those funds directly without a new application. The key difference: redraw draws on funds you have already contributed, while equity release borrows against unrealised capital growth. Both require a lender's approval and serviceability assessment.
How often should I revalue my property to check available equity?
Lenders typically accept a new bank valuation every 12 months, though many will order their own valuation rather than rely on your estimate. In strong capital growth markets, annual revaluations can materially increase your accessible equity — particularly if your property has appreciated 10–20% in a short period. Online automated valuation models (AVMs) provide an indicative estimate, but lenders commission independent kerbside or full valuations before approving equity release. The bank valuation is almost always more conservative than what you'd expect from recent comparable sales — budget for a 5–10% discount from your estimate.
What's the difference between redraw and an offset account for building equity?
A redraw facility lets you withdraw extra repayments you have made above the minimum — the funds are held by the lender and reduce your outstanding balance. An offset account is a separate transaction account where your savings sit alongside your loan: the balance in the offset reduces the interest charged on your loan each day, without actually reducing the loan principal. From an equity perspective, redraw funds and offset savings have the same economic effect — but only redraw funds have actually reduced your loan balance, which is what shows up in an equity calculation. If you need to demonstrate a lower LVR to a future lender, funds in redraw are more useful than funds in offset.
Advanced Strategy
Debt Recycling Calculator
Convert non-deductible home loan debt into tax-deductible investment debt using your equity.
Model Debt Recycling →If You Invest
Negative Gearing Calculator
Model the annual tax offset from using your equity to purchase an investment property.
Model Tax Offset →ASIC Disclaimer: Equity estimates are illustrative only. Actual accessible equity depends on lender policy, current LVR, serviceability assessment, and market valuation. This is not financial advice. Consult a licensed mortgage broker or financial adviser before accessing equity for investment purposes.