How Much Equity Can You Actually Use? A Simple Guide
Equity is what your home is worth minus your loan. Usable equity is lower. Here is how to work out your number.
The short version
- Equity is what your home is worth minus what you owe.
- Usable equity is what a lender may let you borrow against. A common rule is 80% of the home’s value, minus your loan.
- You might use it for a renovation, a deposit on an investment property, or your next home.
- The lender’s valuation, not a website estimate, decides the number.
If you have owned your home for a few years, you may have more options than you think. Between paying down your loan and rising property values, you may have built up equity. Let’s work out how much of it you could actually use.
Equity versus usable equity
Equity is simple. If your home is worth $900,000 and you owe $520,000, your equity is $380,000.
But lenders will not usually let you borrow all of it. Most prefer to stop at 80% of the property’s value, because above that, lenders mortgage insurance (LMI) can apply. So the number you can usually work with is lower.
Example only. Your real figure depends on the lender’s valuation, your loan balance and the lender’s policy.
The formula
- Estimate your home’s value.
- Multiply it by 0.8.
- Subtract what you owe.
What can you use it for?
- A renovation or home improvements, to add comfort or value.
- A deposit on an investment property, without waiting to save cash.
- Upgrading, by using equity as part of the deposit on your next home.
- Consolidating debts, though this is worth thinking about carefully.
Even with plenty of equity, a lender still has to be satisfied you can afford the repayments, including at a higher test rate. Equity gives you the security. Your income and spending decide whether you can service the loan.
Things to think about before you borrow
- Rates and repayments. More debt means higher repayments, and rates have risen four times this year.
- Structure. It is usually cleaner to take equity out as a separate loan, rather than tying your properties together. Ask about how it is secured.
- Tax. If you borrow to invest, how you use the money affects what interest can be claimed. Speak to your accountant before you borrow.
Get the Equity-to-Deposit Planner
Work out how much equity you could use, and how it could become the deposit on your next property.
Send me the plannerWe will email it straight to you.Your next steps
- Get a rough idea of your home’s value, and check your loan balance.
- Run the formula above.
- Talk to a broker about what a lender would actually allow.
Sources and when we checked
Figures checked on 16 October 2026. Sources: Lender policy on loan-to-value ratios (typically 80% before LMI applies); ASIC MoneySmart (home loan basics). The worked example is illustrative. Rules, rates and thresholds can change, so confirm with the official sources or a broker before you act. This article is general information only and is not personal advice.
Want to talk it through?
Book a chat with Richard. He will listen first, then explain your options clearly. No pressure, no jargon.
This article is general information only and does not take into account your personal financial situation, needs or objectives. Consider whether it is appropriate for you before acting on it. Figures and rules can change, so always check the latest details with the relevant authority.
Richard Morris is a Credit Representative (CRN 570376) of Strategic Mortgages Perth (ACR 570592), authorised under Connective Broker Services Pty Ltd (Australian Credit Licence 389328). This is not tax or legal advice. Please speak to your accountant or solicitor about your own situation.