What Is Home Equity and How Can You Use It? An Australian Homeowner's Guide
- Ty Hartwell
- Aug 20
- 5 min read
If you've owned your home for a few years, there's a good chance you've heard someone say you could "use the equity" in your property.
But what does that actually mean?
Put simply, home equity is the difference between the value of your property and the amount you still owe on your home loan.
Depending on your circumstances, some of that equity may potentially be used to help fund another property purchase, renovations or other major expenses.
However, having equity doesn't automatically mean you can—or should—borrow against all of it.
Here's how it works.
What is equity in a home?
Let's use a simple example.
Imagine your home is currently worth $800,000 and you have $500,000 remaining on your mortgage.
Your total equity would be approximately:
$800,000 - $500,000 = $300,000
That doesn't necessarily mean you have $300,000 available to spend.
The amount you may actually be able to access is often referred to as usable equity.
What is usable equity?
Lenders will generally want you to retain a certain amount of equity in your property.
A common starting point when discussing usable equity is borrowing up to 80% of the property's value, although the amount available will depend on the lender, your financial circumstances and the proposed loan.
Using our $800,000 property as an example:
80% of $800,000 = $640,000
If you currently owe $500,000:
$640,000 - $500,000 = $140,000
In this simplified example, you could potentially have around $140,000 of usable equity.
This isn't an approval or a universal rule. A lender will still need to assess your application and determine whether you can service the additional debt.
How can you use equity in your home?
There are several reasons homeowners may consider accessing their equity.
1. Buying an investment property
One of the most common strategies is using equity to help fund the deposit and purchasing costs for an investment property.
Instead of having to save the entire deposit in cash, an eligible homeowner may be able to borrow against equity in their existing property.
You will still need to demonstrate that you can service the resulting loans.
2. Buying your next home
Equity can also become relevant when you're ready to upgrade.
If your current property has increased in value while you've been paying down the mortgage, that equity may contribute towards purchasing your next home.
Exactly how this is structured depends on whether you're selling your existing property, keeping it as an investment or purchasing before you sell.
3. Renovating your home
Some homeowners access equity to fund substantial renovations or improvements.
Whether this makes sense will depend on the cost of the project, your financial position and the way the additional lending is structured.
4. Other major expenses
Depending on the lender and circumstances, equity may also be accessed for other purposes such as debt consolidation.
However, it's important to remember that accessing equity means borrowing more money against your property.
It isn't free money simply because your home has increased in value.
Can I use equity to buy an investment property?
Potentially, yes.
For some property investors, accessing equity in an existing property can form part of the funding strategy for their next purchase.
For example, usable equity might contribute towards:
The investment property deposit
Stamp duty
Legal and conveyancing costs
Other eligible purchasing costs
However, equity is only one part of the equation.
You also need sufficient borrowing capacity to service the additional debt.
That's an important distinction.
You might have substantial equity in your home but still be unable to borrow the amount required if your income, expenses and existing debts don't satisfy a lender's serviceability requirements.
Do I need to refinance to access my equity?
Not necessarily.
Depending on your circumstances, there may be options available through your existing lender or through refinancing to another lender.
The appropriate structure will depend on factors including:
Your existing home loan
Current interest rate
Property value
Income and expenses
How much equity you want to access
What you intend to use the funds for
Your longer-term property and financial goals
This is one reason it's worth looking at the overall loan structure rather than simply asking, "Which lender will give me the money?"
How does a lender determine the value of my property?
The number that matters isn't necessarily what you think your property is worth.
When assessing an equity release, lenders may obtain a property valuation.
That valuation can affect how much usable equity is available.
Two homeowners with similar properties and loan balances could therefore have different outcomes depending on the lender's valuation and lending policies.
Does having equity mean I'll be approved for another loan?
No.
Equity and borrowing capacity are different things.
Equity relates to the value you have built up in your property.
Borrowing capacity relates to your ability to service debt.
A lender may consider your:
Income
Living expenses
Existing home loan
Credit card limits
Personal and car loans
Dependants
Employment
Proposed new debt
You generally need both sufficient equity and sufficient borrowing capacity for an equity-based property strategy to work.
Is using home equity risky?
Borrowing against your home increases your debt, so it should be considered carefully.
If you're accessing equity to buy another property, for example, you'll need to be comfortable servicing the additional lending even if circumstances change.
Interest rates, property values, rental income and your own income can all change.
The question therefore shouldn't simply be:
"How much equity can I access?"
A better question is:
"How much equity can I comfortably access while keeping my overall lending structure sustainable?"
And it is those question we are here to help you answer.
Frequently Asked Questions
How much equity do I have in my home?
As a simple calculation, subtract your outstanding home loan balance from your property's current value. For example, a property worth $800,000 with a $500,000 mortgage has approximately $300,000 in total equity.
How much equity can I actually use?
Your total equity and usable equity aren't necessarily the same. Lenders generally require you to retain some equity in the property. The amount you can access also depends on your borrowing capacity, the lender and your circumstances.
Can I use equity as a deposit for another house?
Potentially. Eligible homeowners may be able to access equity from an existing property to contribute towards the deposit and costs of purchasing another property.
Can I use equity without selling my home?
Potentially, yes. Accessing equity generally involves additional borrowing secured against the property rather than requiring you to sell it.
Does using equity increase my mortgage?
Yes. Accessing equity involves taking on additional debt. Your overall loan balance and repayments may therefore increase.
Can I have plenty of equity but still be unable to borrow?
Yes. Having equity doesn't guarantee loan approval. A lender still needs to be satisfied that you can afford to service the additional debt.
Find Out How Much Usable Equity You Have
If your property has increased in value or you've been paying down your mortgage for several years, you may have more equity than you realise.
The next step is understanding how much of it may actually be usable—and whether accessing it makes sense for what you're trying to achieve.
At Thrive Financial Group, we can review your existing lending, estimate your equity position and assess your borrowing capacity across a broad panel of lenders.
Whether you're considering your next property, an investment or simply want to understand where you stand, we're happy to have a conversation.
Get in touch with Thrive Financial Group to explore your options.
