If you’re a homeowner, you’ve probably heard the term home equity thrown around — but what does it actually mean? And more importantly, how can you use it to your advantage?
Whether you’re dreaming of a renovation, eyeing an investment property, or just curious about your financial options, understanding home equity can unlock real opportunities. Let’s break it down.
What is home equity?
Home equity is the difference between what your home is worth on the market today and how much you still owe on your mortgage.
Put simply:
Home equity = your property’s current value – your outstanding loan balance.
As you pay off your home loan (and if your property value grows), your equity increases. Think of it as the portion of your home that you actually own.
Quick example:
- Your home is valued at $800,000
- Your mortgage balance is $500,000
- Your home equity is $300,000
Nice.
Why is home equity important?
Home equity isn’t just a number on paper. It’s a financial resource you can use to fund your next big move.
You can tap into your home equity for:
- Buying an investment property
- Renovating your current home
- Consolidating debt
- Funding major life goals
The good news? You don’t have to sell your home to access your equity. You can usually refinance your home loan to borrow against it.
How to access your home equity
If you’re thinking about using your equity, here’s a step-by-step guide to get started:
1. Work out how much equity you have
First, you’ll need a solid estimate of your property’s current market value. This could be based on:
- Recent comparable sales in your area
- A real estate agent’s appraisal
- A formal valuation arranged by your lender
Subtract your remaining mortgage balance from this figure to calculate your total equity.
2. Calculate your usable equity
Lenders won’t let you borrow 100% of your equity. Generally, you can access up to 80% of your property’s value, minus your current loan.
This is your "usable" equity.
For example:
- Property value: $800,000
- 80% of value: $640,000
- Current loan: $500,000
- Usable equity: $140,000
Remember: your income, expenses, and ability to repay the loan also play a big part in how much you can actually access.
3. Review your loan options
This is where we come in. A good mortgage broker (hi 👋) can help you compare your current home loan with options from other lenders.
It’s the perfect time for a full home loan health check — looking at interest rates, fees, features, and finding a solution that works for your goals.
4. Understand the costs
Using your equity isn’t free.
If you’re borrowing more than 80% of your home’s value, you’ll likely need to pay Lenders’ Mortgage Insurance (LMI).
There may also be costs like:
- Break fees (if you’re on a fixed rate loan)
- Loan application fees
- Government charges
We’ll always run you through the full picture so there are no surprises.
5. Apply and settle
Once you’ve picked the right loan, we’ll handle the application process from start to finish.
Think of us as your expert sidekick for every step.
What can home equity be used for?
Your home equity is flexible. It can be the key to:
- Purchasing a second property: Use your equity as a deposit for an investment property.
- Renovations: Upgrade your home without draining your savings.
- Debt consolidation: Roll multiple debts into one loan with a lower interest rate.
- Life plans: Some use their equity for education, business ventures, or even travel.
The possibilities are real — but so is the responsibility. Always chat with a professional before making a move.
Things to keep in mind
Before you dive in, a few smart reminders:
- The more you borrow, the higher your repayments.
Property values can change — don’t stretch yourself too thin. - Investment loans and home loans are taxed differently. (Good news: investment loan interest is generally tax-deductible.
- Your existing investment properties might also have usable equity!
Final word: Home equity is your secret weapon
Building home equity takes time — but once you’ve got it, it opens doors.
With the right strategy (and a broker who’s got your back), you can turn that hard-earned equity into your next opportunity.
Curious about your options? Chat with us today. We’ll help you work out how much equity you’ve built, and what’s possible from here.
