The gap between what your home is worth and what you owe is your equity. The part a lender will hand back is smaller, and knowing the difference before you plan around it saves an awkward conversation. Below you get both - plus the two things most equity calculators leave out: what releasing it does to your repayment, and what a sharper rate gives back when you refinance to release it.
Your current LVR is 44%. Lenders generally release equity down to 80%, and up to 90% if you are willing to pay lenders mortgage insurance.
Equity you could actually use
$320,000
You have $500,000 of equity in total. This is the part a lender would normally release at 80% - the rest stays in the house.
Total equity
$500,000
Usable at 80%
$320,000
Extra to 90% with LMI
$90,000
Current LVR
44%
What it does to your repayment
$400,000 at 6.30%
$720,000 at 6.30% - up $1,981 a month
$720,000 at 5.90% - gives back $186 a month
Releasing equity is borrowing, and the repayment goes up. Repricing the loan at the same time takes $186 a month off that increase - covering 9% of it.
You have to refinance to release it. Re-price it while you are there.
Accessing equity means re-writing the loan, so the rate is on the table in the same conversation. Most people do this with their existing lender and never test the price - which is the loyalty tax at the exact moment it costs most, because it is now compounding on $720,000 instead of $400,000.
What that would buy
Used as a 20% deposit on an investment property, with Queensland transfer duty and about $3,000 of costs taken out first, $320,000 supports a purchase around $1,306,699 - a $261,340 deposit plus $55,660 of duty.
Most calculators divide equity by 20% and stop. Duty comes out of the same money, so that answer is always too high - here it comes out first.
Equity is not approval.
This is what the security supports. It is not what a lender will give you. They still have to see the repayments serviced at an assessment rate around three percentage points above the actual rate, and income, existing debts and credit card limits all decide that. Plenty of people have $320,000 of usable equity and cannot borrow it.
The reverse is better news: lender policy on equity releases varies more than almost anything else in lending, so a decline from one is not a decline from thirty-five.
What a lender would normally release at 80% of value, by what your home is worth and what you still owe. A dash means the loan already sits above 80% - there is equity in the property, but none a lender would hand back without LMI.
| Property value | Owing $200,000 | Owing $350,000 | Owing $500,000 | Owing $650,000 |
|---|---|---|---|---|
| $600,000 | $280,000 | $130,000 | - | - |
| $750,000 | $400,000 | $250,000 | $100,000 | - |
| $900,000 | $520,000 | $370,000 | $220,000 | $70,000 |
| $1,100,000 | $680,000 | $530,000 | $380,000 | $230,000 |
| $1,400,000 | $920,000 | $770,000 | $620,000 | $470,000 |
Value x 80% less the loan balance. Going to 90% with lenders mortgage insurance releases more. Indicative only - your lender's valuation is the one that counts.
| Property value | Total equity | Usable equity | Supports a purchase around |
|---|---|---|---|
| $600,000 | $200,000 | $80,000 | $334,362 |
| $750,000 | $350,000 | $200,000 | $832,551 |
| $900,000 | $500,000 | $320,000 | $1,306,699 |
| $1,100,000 | $700,000 | $480,000 | $1,928,058 |
| $1,400,000 | $1,000,000 | $720,000 | $2,860,097 |
Assumes $400,000 still owing, the released equity used as a 20% deposit, and Queensland transfer duty at investor rates plus about $3,000 of costs taken out first. The last column is what the security supports, not what a lender will approve.
You cannot draw equity out without re-writing the loan, which means the rate is on the table in the same conversation - and almost nobody treats it that way. Most people go back to their existing lender, take the money, and never test the price. That is the loyalty tax paid at the worst possible moment, because it now compounds on a bigger balance for another thirty years.
One application, two decisions: how much you release, and who prices the loan afterwards. The calculator above shows what the release adds to your repayment and how much of that a sharper rate hands straight back. If you are refinancing anyway, that is the whole argument for shopping it - and if your fixed period is ending, the timing matters more than usual.
Every equity calculator returns a number. Almost none of them mention that the number is about the SECURITY, not about you. A lender still has to see the repayments serviced at an assessment rate roughly three percentage points above the rate you would actually pay - after living expenses, existing repayments, and a slice of every credit card limit whether you use it or not.
Which is why the useful version of this conversation is not “how much equity do I have” but “how much of it will someone actually lend me, and on what terms”. Lender policy on income, debts and equity releases varies more than almost anything else in lending, so one bank’s answer is not the market’s.
Generally your property's value times 80%, less what you still owe. The 80% is where lenders stop asking for lenders mortgage insurance, so it is the practical ceiling rather than a legal one - you can go to about 90% if you are willing to pay LMI. The number people usually have in mind is their TOTAL equity, which is the whole gap between the loan and the value. On a $900,000 home with $400,000 owing that is $500,000 of total equity and $320,000 of usable equity, and the $180,000 difference is not money you can get at.
Equity is what the property is worth minus what you owe. Usable equity is the part a lender will actually release, which is normally 80% of the value minus the loan. The gap between them is the buffer the lender keeps against the property falling in value. It is the single most common misunderstanding in a first equity conversation, and it is why a calculator that returns one number does people a disservice.
Yes, and it is the most common reason people release it. The released amount usually has to cover the 20% deposit AND the transfer duty and costs, which is where the arithmetic surprises people - the duty comes out of the same money. The calculator above takes duty out first for exactly that reason, using the Queensland scales. Structurally it is normally set up as a separate split against your home rather than one large loan, which keeps the investment interest identifiable at tax time.
Effectively yes. Releasing equity means increasing the loan against your home, which is a new credit application and a re-written loan whichever lender does it. That is worth knowing because it changes the question: you are not just asking for money, you are re-opening the price of the whole loan. Most people go back to their existing lender, take the equity and never test the rate - which is the loyalty tax paid at the worst possible moment, since it now compounds on a bigger balance for another thirty years. If you are re-writing it anyway, it should be priced against the market.
Yes, and any calculator that shows you the money without showing you that is selling rather than calculating. Releasing equity is borrowing: the balance goes up and so does the repayment. On a $400,000 loan at 6.3% over 30 years, releasing $320,000 takes the monthly repayment from about $2,476 to about $4,457. Moving to a rate 0.4 points sharper at the same time gives roughly $186 a month of that back. That is the honest trade, and it is why the two decisions belong in one conversation.
No, and this is the part worth understanding before you plan around a number. Equity tells the lender the security is there. Serviceability tells them you can make the repayments, and they test that at an assessment rate around three percentage points above the actual rate, after your living expenses, existing repayments and credit card limits. Plenty of people have $300,000 of usable equity and cannot borrow it. Policy varies widely between lenders on how income and debts are treated, so one decline is not the market's answer.
Usually yes. The lender lends against their valuation, not your estimate or the number a listing site shows, and the two can differ by a lot. Valuations range from an automated estimate to a full inspection depending on the lender, the amount and the property. If you are close to a threshold it is worth knowing which lenders are likely to value it favourably before you apply, because a valuation that comes in low is on your credit file either way.
Sometimes, and it should be a calculation rather than a reflex. LMI is a real cost, usually added to the loan so you pay interest on it for the life of the loan. If the extra equity secures an asset that earns more than that costs, it can be worth it. If it funds something that does not, it rarely is. What it should never be is a surprise - price it before you decide, not after.
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