How to calculate your equity
If you’ve owned your home for several years, there’s a good chance you’ve accumulated some equity.
Equity is the difference between the value of your home and your outstanding mortgage, and can be expressed as a number or percentage.
For example, if you originally bought a $1 million home with a $200,000 deposit and $800,000 loan, your starting equity would’ve been $200,000 / 20% (while the lender’s would’ve been $800,000 / 80%).
If your home had since increased in value to $1.2 million and you’d reduced your loan to $744,000, your equity would’ve increased to $456,000 / 38%. (That’s because the difference between $1.2 million and $744,000 is $456,000, and $456,000 is 38% of $1.2 million.)
Total equity vs useable equity
The reason equity matters is because you can potentially borrow against that equity and use those funds to renovate your home or put down a deposit on an investment property. In other words, you can convert your paper wealth into functional cash.
You can’t ‘cash out’ all of your equity, because your lender will want you to maintain an equity buffer in your property. That’s to reduce their risk – because if you default on your mortgage and the lender seizes your home, they need to be sure the sale proceeds will cover the outstanding debt.
Generally, lenders are comfortable with homeowners reducing their equity to 20%. It’s possible to go beyond this, but lenders will generally expect the borrower to pay lenders mortgage insurance.
So as a general rule, assume your ‘useable equity’ would be your current equity stake minus 20%. In our hypothetical example, that would be 18% (i.e. 38% minus 20%).
How to capitalise on your equity
As part of the process of tapping into your equity, the lender will generally conduct a formal valuation of your property and expect you to refinance your loan.
That means you’ll need to again prove your creditworthiness to your lender (or your new lender), even if you’ve been making all your mortgage repayments on time.
So it’s best to approach this process as you did when you originally took out your loan, which means restraining your expenses and getting your documents in order.
Is borrowing against your equity right for you?
Cashing out equity can be a clever (and profitable) financial strategy. Bear in mind, though, that it involves risk, because it means taking on more debt, so it’s not suitable for everyone.
Get in touch if you’re thinking about tapping into your equity. We can calculate how much equity you have, explain how you might be able to use that equity, and outline the pros and cons of your options.
If you decide to proceed, we’ll make things easy for you by managing the entire loan application process from start to finish.
Licensing statement: Rayne Finance ABN [70 605 100 838] is authorised under LMG Broker Services Pty Ltd Australian Credit Licence 517192. Disclaimer: (1) As with any financial scenario there are risks involved. This information provides an overview or summary only and it should not be considered a comprehensive analysis. You should, before acting in reliance upon this information, seek independent professional lending or taxation advice as appropriate and specific to your objectives, financial circumstances or needs. This publication is provided on the terms and understanding that: (2) LMG Broker Services Pty Ltd, Rayne Finance (Seed Lending Pty Ltd) and the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication. (3) LMG Broker Services Pty Ltd, Rayne Finance (Seed Lending Pty Ltd) and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to the maximum extent permitted by the law to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication.
Explore other FAQs and Facts
How to buy your first home with a sibling or friend
Buying your first home with a sibling or friend can make it easier to get into the market. By combining deposits and sharing costs, you may be able to buy sooner or buy better. With support like the First Home Guarantee, co-ownership can be a practical path to ownership.
Experts outline their price and rent forecasts for 2026
Australia’s property market is entering 2026 with continued momentum, according to forecasts from Domain, SQM Research and Ray White Group. While growth rates are expected to vary by city and property type, the overall outlook points to rising prices and rents, shaped by interest rates, supply levels and broader economic conditions.
Grants, Schemes & Deposits: A 2026 Guide for First Home Buyers
Buying your first home is about more than just saving a deposit. This guide breaks down what a deposit really means, how much you might need, and the key government grants and schemes available in 2026 to help first home buyers get into the market sooner.
Savings: The Foundation of Your First Home Deposit
Saving for your first home is not just about how much money you have. Lenders also look at how your deposit has been built over time. Understanding the difference between savings and genuine savings early can make the entire home buying process clearer and far less stressful.
Buy now pay later (BNPL): Helpful for Christmas but will it hurt your home loan chances?
Did you use BNPL to get through Christmas? You’re not alone. But with new credit rules now in place, even small pay-later habits could affect your chances of getting a home loan. Here’s what’s changed, what lenders are looking at, and how to make sure your BNPL use doesn’t hold you back.
Regional Victoria: Why buying now stacks up
Regional Victoria’s property market has hit a sweet spot in 2025. Towns like Ballarat, Bendigo and the Surf Coast are seeing steady growth supported by real demand, thriving infrastructure and better buyer choice. With balanced conditions and lasting value on offer, it’s an ideal time to make your move locally.
The Block Daylesford: TV Hype vs. Market Reality
The Block’s Daylesford finale made headlines for all the wrong reasons, but beyond the TV drama, the regional outcome was far from a failure. With three homes selling over $3 million and millions injected into the local economy, the real winner wasn’t the contestants, it was the town.
Five tips to get your property ready for sale
Spring is peak selling season, with listings up 14.4% in August alone. Warmer weather, blooming gardens, and longer days bring buyers out in force. If you’re thinking of selling, small changes like freshening up your street appeal or boosting natural light can make a big impact on both speed and price.
50,000 new places in the Home Guarantee Scheme
From 1 July 2025, an extra 50,000 places are available in the Home Guarantee Scheme, helping eligible buyers purchase a home with a smaller deposit and avoid lenders mortgage insurance. The scheme has already supported over 160,000 Australians since 2020, with tailored guarantees for first-home buyers, regional buyers, and single parents.
How property markets are performing throughout Australia
Australia’s property market is maintaining steady momentum, with dwelling prices rising 1.7% in the first five months of 2025. Perth leads annual growth at 8.6%, followed by Adelaide and Brisbane. Nationwide, demand is outpacing supply, fuelled by interest rate cuts, strong migration, and renewed buyer confidence.