Total equity and usable equity
Total equity is the value of your property less what you owe. Usable equity is the part a lender will actually let you borrow against. Most lenders lend up to 80% of the value without lenders mortgage insurance, so that's the usual starting point.
Usable equity isn't money you automatically get. You still need the income to support the bigger loan, and the lender will order its own valuation first.
What people use equity for
- A deposit for an investment property or your next home
- Renovations, extensions or a pool
- Consolidating car loans, personal loans and credit cards into a lower rate
- A buffer for business or family plans
Setting the new money up as its own loan split keeps it easy to track, and that matters for tax if it's used for investment. Your accountant can confirm.
Questions people ask
How much equity can I borrow against?
Usually up to 80% of your property's value, less what you owe, without paying LMI. Some lenders go higher with LMI, or with a professional waiver.
Do I need to refinance to use my equity?
Not always. Your current lender may increase your loan. Refinancing can make sense if another lender offers a better rate or values your property higher.
Will a lender value my property at what I think it's worth?
Not necessarily. Lenders use their own valuers, and the result can be lower than you expect. I can often get an indication before you apply.
