If you've owned your home for several years, you've likely built up equity without giving it much thought. That equity can be accessed and used for a range of purposes: buying an investment property, renovating, consolidating debt, or simply having a financial buffer available. Here's how it works and what your options are.
What Is Home Equity?
Equity is the difference between what your home is currently worth and what you owe on your mortgage. If your home is valued at $900,000 and you owe $500,000, your equity is $400,000.
However, lenders don't let you access all of that equity. They typically lend up to 80% of the property's current value, which means you can only access what's called your usable equity. Using the same example: 80% of $900,000 is $720,000. Subtract your $500,000 loan balance, and your usable equity is $220,000.
How to Calculate Your Usable Equity
The formula is straightforward:
(Current property value x 0.80) minus outstanding loan balance = usable equity
If you're not sure of your current property value, a broker can arrange a market appraisal or lender valuation to give you a current figure. Property values have moved considerably in many parts of Australia in recent years, so the equity you have now may be meaningfully more than what you had when you last checked.
Ways to Access Your Home Equity
Refinancing to a Higher Loan Amount
The most common approach is refinancing: you either refinance with your existing lender (a "loan top-up") or move to a new lender at a higher loan balance. The additional funds are released to you as cash. A top-up with the same lender can take one to two weeks. Switching to a new lender typically takes three to four weeks.
Line of Credit
Some lenders offer a home equity line of credit, where you're approved to draw up to a set limit based on your usable equity. You only pay interest on what you actually draw, and you can access and repay funds flexibly. This can work well for ongoing expenses or projects where the total cost isn't known upfront.
What Can You Use Equity For?
Common uses include buying an investment property (using the equity as the deposit), funding renovations, paying for education, consolidating higher-interest debts into your lower mortgage rate, or simply having access to funds for unexpected costs.
Lenders will ask what you intend to do with the funds, and the purpose can affect which products are available to you and how the loan is structured.
What to Watch Out For
Accessing equity increases your loan balance and your repayments. It's worth making sure the purpose is genuinely worth the additional debt, and that the repayments remain manageable. Using equity to fund lifestyle spending or holidays is technically possible, but it means increasing your mortgage to cover expenses that don't add long-term value to your financial position.
Lenders have also tightened their assessment criteria around cash-out refinancing in recent years, particularly at higher LVRs. Most banks cap cash-out at 80% LVR for owner-occupiers.
Find Out What Equity You Have Available
At Swish, we regularly help homeowners understand how much equity they have, what they can access, and how to use it in a way that's structured to their advantage. If you're curious about what equity you've built up and what it could do for you, book a free call with Swish and we'll work through the numbers with you.