What is home equity?

Home equity is the slice of the property value that's yours after deducting the outstanding loan balance. It grows two ways: capital growth (property value rising over time) and principal repayment (loan balance falling each month under P&I).

Useable equity is a tighter figure than total equity. Lenders typically let you borrow against equity above the equivalent of 80% LVR on the current property value, because anything above that triggers LMI. A $700,000 home with a $400,000 loan has $300,000 of total equity but only $160,000 of useable equity (80% of $700K = $560K, minus $400K balance).

Useable equity is most commonly tapped for an investment property deposit, renovation, or a vehicle/business loan structured as a top-up. Each use case has different tax, deductibility and serviceability implications — see your broker or a tax adviser before structuring.

home equity · useable equity · available equity