How Much Equity Can You Actually Access From Your Property?
If you own property, there's a good chance you've heard someone say:
“You've got plenty of equity.”
But there's an important difference between having equity and being able to access that equity through a lender.
And if you're thinking about buying another investment property, that distinction matters.
Your property might have increased substantially in value since you purchased it. You may also have paid down your home loan. On paper, you could be sitting on hundreds of thousands of dollars in equity.
But how much could you actually use? Let's break it down.
What is home equity?
Home equity is simply the difference between the current value of your property and how much you still owe against it. For example:
Property value: $1,000,000
Existing home loan: $600,000
Total equity: $1,000,000 − $600,000 = $400,000
So you have $400,000 in equity. Simple enough. But that doesn't necessarily mean a lender will allow you to withdraw the full $400,000. That's where usable equity comes in.
What is usable equity?
Usable equity is the portion of your property's equity that you may potentially be able to borrow against. Many investors initially look at an 80% loan-to-value ratio (LVR), because borrowing above certain LVR thresholds can introduce additional lender requirements and potentially lenders mortgage insurance.
Using the example above:
Property value: $1,000,000
80% of property value: $800,000
Existing mortgage: $600,000
Potential usable equity: $800,000 − $600,000 = $200,000
So although the homeowner has $400,000 in total equity, their potential usable equity at an 80% LVR is around $200,000 — which could potentially contribute towards the deposit and acquisition costs for another property. But there's another piece of the puzzle.
Having equity doesn't automatically mean you can borrow it
This is where people can get caught out. A lender doesn't look only at your property value — they also assess whether you can afford the additional debt. That means your accessible equity will generally be influenced by factors including:
● your income
● existing mortgages
● credit cards and personal debts
● living expenses
● dependants
● rental income
● interest rates
● the lender's servicing assessment
● your overall credit profile
So you might have $300,000 in theoretical usable equity but only the borrowing capacity to access part of it. This is why I normally look at equity and borrowing capacity together — one without the other doesn't tell us enough.
What happens if your property value falls?
This is where timing becomes important. Let's go back to our original example. Your property is worth $1,000,000 and you owe $600,000. At 80%, you potentially have $200,000 usable equity.
Now imagine the lender later values the property at $900,000. 80% of $900,000 is $720,000. Minus the existing $600,000 mortgage, that leaves $120,000 usable equity.
Nothing changed with the mortgage. But the potential usable equity fell from $200,000 to $120,000 — an $80,000 difference.
This doesn't mean property owners should panic and release equity every time the market changes. But it does highlight something important:
The equity available to you today isn't necessarily the equity that will be available later.
How can you access equity?
There are several possible structures depending on the lender and your circumstances. One option may be increasing your existing loan. Another may involve refinancing to another lender and establishing a separate equity loan split.
For property investors, I generally prefer to carefully consider how the equity release is structured, rather than simply increasing one large loan and mixing different purposes together. For example, you might ultimately have:
Loan 1: Existing owner-occupied debt
Loan 2: Equity released for investment deposit and costs
Loan 3: New investment property loan
Keeping different loan purposes clearly separated can make the lending easier to track and may be particularly important when discussing tax treatment with your accountant. The ATO generally considers the use of borrowed funds, rather than simply which property secures the loan, when determining whether interest may be deductible. For personalised tax advice, speak with your accountant or tax adviser.
Do you need to buy immediately after releasing equity?
No — and this is an important distinction. Preparing to buy and actually buying are two different decisions.
Depending on your circumstances and lending structure, it may be possible to arrange your finance before you have identified the next investment property. That can give you time to understand:
● how much equity you have
● how much you can borrow
● your approximate purchasing range
● your expected repayments
● which lenders suit the strategy
● how your existing lending should be structured
You can then make your property decision separately.
Don't rush to buy. Understand your position first.
When should you review your equity?
A review can be worthwhile if:
● you've owned your property for several years
● values in your area have changed
● you've recently renovated
● you've reduced your loan significantly
● you're considering buying another property
● your current lender hasn't valued the property recently
● your income has increased
● you're reviewing your overall investment strategy
You may be surprised by how different your position is today compared with when you originally purchased.
The bottom line
Equity can be a powerful tool for property investors. But equity on paper isn't the same as usable equity. You need to understand three numbers:
1. What is your property worth?
2. How much usable equity could a lender allow?
3. How much additional debt can you actually service?
Once we know those three numbers, we can start having a much more useful conversation about what your next investment could look like.
Quick questions
Is usable equity the same as total equity?
No. Total equity is your property's value minus what you owe. Usable equity is the smaller portion of that a lender may actually let you borrow against — typically calculated at around 80% of the property's value, minus your existing mortgage.
Can my usable equity go down even if I haven't borrowed more?
Yes. If your property's assessed value falls at your next valuation, the usable equity figure recalculates from the new, lower value — even though your mortgage balance hasn't changed.
Do I have to buy a property straight away if I release equity?
No. Releasing equity and buying a property are two separate decisions. Many investors arrange their equity and finance first, then take their time to find the right opportunity.
Related reading
→ Why Your Borrowing Capacity Can Change — Even When Your Income Hasn't — /investment-property-borrowing-capacity/
→ Should You Refinance Before Buying an Investment Property? — /refinance-before-buying-investment-property/
Want to know your current equity position? At Fundex Capital, we can review your current lending, obtain an indicative valuation where appropriate, assess your borrowing capacity and show you how much equity you may potentially be able to access.
