Calculate usable equity: Determine your home's equity by subtracting your mortgage balance from its current market value. Accessing up to 80% of this value is common.
Refinance to unlock equity: Engage in refinancing to release equity, which involves a property valuation and possibly increasing your loan amount.
Understand associated risks: Be aware of potential risks such as overborrowing, LMI costs, and interest rate exposure when utilising equity for property upgrades.
Owning a home isn’t just about having a place to live, it can also be a powerful way to build wealth over time. And one of the biggest advantages of homeownership? Equity.
If you’ve owned your property for a few years, or if property values in your suburb have gone up, chances are you’ve built up equity. This value could help you move into a bigger or better home, without needing to save a whole new deposit from scratch.
This guide explains what equity is, how to calculate it, how to use it to fund your next home purchase, and what to watch out for along the way. It also shows you how Aussie Brokers can help you unlock equity safely, so your upgrade is as stress-free as possible.
What is home equity and how much do you have?
Equity is the difference between your property’s current market value and the remaining balance on your home loan. The more your home has gone up in value, or the more you’ve paid down your loan, the more equity you’re likely to have.
Equity formula:
Current property value – Loan balance = Total equity
But not all of your equity is immediately available to use. Lenders typically let you access up to 80% of your home’s value (unless you're willing to pay Lenders Mortgage Insurance or offer additional security).
Example calculation:
Your home is worth $850,000
80% of that is $680,000
You owe $500,000 on your mortgage
Your usable equity is $180,000
This usable equity can be applied toward a deposit, construction, or renovation costs for your next home.
If your loan-to-value ratio (LVR) exceeds 80%, Lenders Mortgage Insurance (LMI)is often required. Some lenders may allow more than 80% LVR if additional security is offered.
However, some lenders might offer “No LMI” loans for borrowers with a strong financial history, depending on the circumstances.
You can calculate your estimated home loan repayments, or see how refinancing could help save you money.
Why use equity instead of saving a deposit?
Many homebuyers assume they’ll need to save tens of thousands of dollars in cash for their next deposit. But your equity can act as that deposit, helping you move sooner.
That means:
You could avoid years of saving
You may be able to buy sooner or in a better area
You could potentially retain your current home as an investment
Using equity is particularly useful if you’re upgrading to a home with more space, better amenities, or a more desirable location.
You might also be interested in: Sell or rent out? What to do with your current home when buying a bigger home
Using equity as a deposit on your next home
Let’s say you’re eyeing a $1.2 million forever home, and you’ve built up $250,000 of usable equity in your current place.
Instead of trying to save a 20% deposit (which would be $240,000), you could use your equity as the deposit and apply for a new home loan to cover the rest.
How the process works:
Request a property valuation
Most lenders will require a formal valuation to determine how much usable equity you actually have.Apply for an equity release loan (or top-up)
This means increasing your existing mortgage or taking out a new loan against your property’s value.Use that equity as a deposit
The funds from your existing property help you secure the next one.
Common structures:
Top-up loan: Increase your current home loan to access equity
Redraw facility: Access any extra repayments you’ve made
Line of credit: Use your equity like a flexible loan, though usually with higher interest
Cross-collateralisation: Secure the new loan across both your current and new properties (speak to a broker first, it’s not always the ideal option)
Not sure which one is right for you? An Aussie Broker can help you compare your options and choose the most suitable path forward.
Refinancing to release equity
Many Aussie homeowners refinance when upgrading, not just to access equity, but to secure a better rate or more flexible loan structure at the same time.
What refinancing involves:
A full review of your current home loan
A new valuation on your property
Lender assessment of your borrowing capacity
Choosing a new loan product that suits your goals
This is where an Aussie Broker can save you time and money. They’ll compare loans from over 25 lenders** and guide you through the paperwork, timelines, and approval process.
If your current rate is over 6%, refinancing could unlock equity and potentially reduce your repayments.
Risks and considerations
Equity is not “free money” and borrowing against it should always be done with a long-term view and smart planning.
Things to be mindful of:
1. Overborrowing risk
Using too much equity can stretch your finances, especially if your new home comes with higher repayments, bigger maintenance costs, or longer commutes.
2. Lenders Mortgage Insurance (LMI)
If your new loan pushes your LVR above 80%, LMI can add thousands to your costs. Your broker will help you avoid it if possible.
3. Interest rate exposure
Releasing equity increases your debt, which could become harder to manage if interest rates rise or your income changes.
4. Double commitments
Buying before selling? You could face overlapping mortgage payments. This is where bridging loans may be helpful, but only with a clear strategy in place.
An Aussie Broker can help stress-test your numbers and ensure you’re making a smart, sustainable move.
You might also be interested in: How buying your second home is different to buying your first
Smooth transition strategies
If you’re planning to use equity to upgrade, timing and preparation are everything. Here’s how to keep things moving smoothly:
Get a valuation early
This ensures your numbers are accurate and current.Line up pre-approval
Knowing how much you can borrow gives you confidence when making offers.Keep a cash buffer
Always leave room for costs like moving, stamp duty, or repairs.Explore bridging options
Aussie Bridge may help if your purchase and sale don’t line up.Think beyond the upgrade
Will you need equity later for renovations or investing? Factor that in now.
Equity access planning checklist
Step | What to do | Why it matters |
|---|---|---|
1 | Estimate your property’s value | Helps determine how much equity you could potentially access. Use your Aussie App or ask your broker for a valuation. |
2 | Calculate your usable equity | Gives a realistic picture of what portion of your equity you can safely use, usually up to 80% of your home’s value minus what you owe. |
3 | Chat to an Aussie Broker | Your broker will explain your options, arrange a valuation, and guide you through the most suitable structure for accessing your equity. |
4 | Choose how to access your equity | Options include loan top-up, redraw, line of credit, or refinancing. Each has different features, risks, and flexibility. |
5 | Define your upgrade budget | Use a borrowing power calculator to combine equity and income into a clear purchase price range. |
6 | Apply for pre-approval | Know exactly what you can borrow and bid on or negotiate with more confidence. |
7 | Consider bridging finance | If you're buying before selling, bridging loans like Aussie Bridge can help manage the gap without stress. |
8 | Plan for all additional costs | Include stamp duty, loan fees, moving expenses, and a buffer for the unexpected. |
9 | Keep long-term goals in mind | Don’t use all your equity upfront if you’re planning future renovations or investments. Leave room to grow. |
You might also be interested in: Applying for a home loan? Here’s what tax returns you’ll need
Why work with an Aussie Broker?
Your equity is only one piece of the puzzle. To unlock it safely, and make your upgrade as seamless as possible, you need the right guidance. An Aussie Broker brings:
Access to thousands of loan products from over 25 lenders**
Local market knowledge and expert property insights
Help comparing refinance deals and negotiating rates
End-to-end support from valuation to pre-approval to settlement
They’ll take care of the complex stuff so you can focus on your next chapter.
Turn equity into opportunity
You’ve worked hard to build value in your home, now it’s time to let it work for you. Whether you’re dreaming of a bigger backyard, a better lifestyle, or a fresh start, using your equity could be the smartest way to get there.
The key? Using it wisely, planning, and getting expert help is important.
Book an appointment with an Aussie Broker and explore your upgrade options today