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If you’ve owned your home for a while and kept on top of payments, you might have built up a decent amount of equity. You can access and use this equity for various financial purposes, including renovations, investments or even travel.

Read our guide to learn how to calculate the amount of equity you have in your home and how you can use this valuable resource.

What is home equity?

Equity is the difference between the current market value of your property and the amount remaining on your home loan. Every time you make a repayment, your equity increases. You also build up more equity as the value of your property increases.

Here’s an example:

If you bought a house for $650,000 with a deposit of $100,000 and a loan of $550,000, you had $100,000 equity in that house.

Now let’s say you have repaid $150,000 on the loan and the property’s value has increased to $800,000. You now have an $800,000 property with (for ease of argument) $400,000 left to pay on the home loan.

This means the equity in your home has risen to $400,000 (property value minus remaining home loan balance).


What is negative equity?

Equity works both ways. If your property’s value increases, so does your equity. But if your property’s value drops, then your home’s equity will too. If market conditions are against you then your property’s value can sink below the balance you have remaining on your home loan.

You can take steps to offset the effects of this by:

  • Increasing regular repayments: Increasing the amount you repay each month will increase your equity faster and help reduce the impact of market fluctuations.
  • Make one-off contributions whenever possible: If you have some extra cash or received a windfall, use some of this to repay part of your home loan.

What can you use equity for?

Your home equity can be accessed and used for various purposes, including:

  • Home renovations or extensions to increase your home’s market value
  • Topping up your current home loan to consolidate debts
  • Investing in another property, shares or managed funds
  • Buying a new car or funding travel.


How to access the equity in your home

If you think you have built up a decent amount of equity in your home, these are the steps to take to access and use it for various purposes.

1. Calculate how much equity you have available

Start by calculating how much equity you have built up. You can do this by estimating the current market value of your home and subtracting the balance on your home loan (and any other loans secured by your property).

One way to calculate the current value of your home is to research recent sales in your area. We also offer a free property valuation report that can be used to get a sense of how much your home is worth compared to recent sales of similar properties in your area.

2. Work out your usable equity

Your usable equity is the amount of equity in your home that you can access and use. Lenders will typically allow you to access 80% of your home’s current value minus any debt you still owe.

To demonstrate, let’s use the example above where your home is worth $800,000 and you have $400,000 left on your home loan.

80% of $800,000 = $640,000

Minus the amount left outstanding on your home loan ($400,000)

Usable equity = $240,000

Before you can access your usable equity, you must demonstrate that you can afford repayments on the full loan amount. This means that you can continue to pay off your previous mortgage plus the new loan.

For example, if the amount of additional repayments you can afford, depending on your income expenses, is only $60,000 then that would be the amount of equity you can realistically unlock. You might not want to access the full amount of equity you have available as this could leave you exposed if property prices were to dip.


3. Review loan options & refinance

Once you have understood your property’s value and how much usable equity you have, you may want to review your home loan and see if it still suits your needs and plans. It may be a good idea at this point to research and assess different home loan options with a home loan specialist.

If your current home loan no longer suits your needs, you might want to refinance your home loan to access a better rate and features. Refinancing involves moving your loan to another lender.

4. Calculate the costs of accessing equity

Depending on the amount of equity you want to access and the home loan you choose, you may have to pay various fees and costs.

If you have decided to access more than 80% of your property’s value, for example, you will need to pay Lenders Mortgage Insurance. Switching to another lender may also include fees for breaking from a fixed rate product, new loan applications or government fees.

5. Apply for a new loan

The final step before accessing your equity is applying for a new loan. At this stage, it’s best to work with a specialist who can provide support throughout the application process until settlement.

Once this step is finalised, you can start using your equity for whatever purpose you like.

What’s next?

If you think you may have built up a considerable amount of equity in your home, it may be time to put that money to good use. Whether it’s investing in another property or increasing your home’s valuation with renovations, equity is a valuable resource that can be used to your advantage.

If you’re not sure what your equity options are, our team is ready to help. We can guide you through unlocking your equity, including offering free property valuation reports, assessing your home loan, and helping you find a new home loan that’s more suitable to your needs and goals.


As a leading mortgage broker, Fox Home Loans offers an extensive range of home loan products from over 50 lenders. Our team of experienced finance professionals is here to guide you through the entire process, ensuring you find the perfect home loan that meets your specific needs.  Contact Fox Home Loans today for a FREE assessment of your lending requirements: 1300 665 906