Free tool
Usable Equity Calculator
Find out how much of your home's equity a lender would actually let you use — and the price of an investment property it could cover the deposit and purchase costs on.
Your property
The next purchase
Usable equity
$270,000
80% of the value, less what you owe
Could fund a purchase of
$1,080,000
Covering a 20% deposit and 5% costs — you would borrow $864,000 for the rest
Total equity
$450,000
What the property is worth, less what you owe
Owed against it now
50%
Your loan as a share of the value — its LVR
What the value is made of
The property’s value, split into what you owe, what a lender would let you borrow, and the part no lender will advance at 80%.
- Loan$450,000
- Usable equity$270,000
- Equity lenders keep back$180,000
How the number is built
| Property value | $900,000 | |
| × | The lender's limit | 80% |
| = | The most you could owe against it | $720,000 |
| − | What you owe | $450,000 |
| = | Usable equity | $270,000 |
| ÷ | 20% deposit plus 5% costs on the next purchase | 25% |
| = | Purchase price it could fund | $1,080,000 |
General information only. Usable equity depends on the lender’s own valuation, which can come in below your estimate, and using it depends on your borrowing power: the equity funds the deposit and costs, but you still have to qualify for the new loan, and for any increase on this one. Purchase costs vary by state and price. It is not credit assistance, tax advice or a recommendation. Our Credit Guide sets out who we are and how we are licensed.
Equity, and usable equity
Equity is what your property is worth minus what you owe on it. A $900,000 home with a $450,000 loan has $450,000 of equity — money you would have, before costs, if you sold.
Usable equity is the part a lender will let you borrow. Most lenders will let you owe up to 80% of a property’s value without lenders mortgage insurance, so the most you could owe on that home is $720,000. You already owe $450,000, which leaves $270,000 usable. The other $180,000 is real equity, but no lender will advance it at 80%.
What that equity could buy
Usable equity normally becomes the deposit and purchase costs on the next property. With a 20% deposit to avoid lenders mortgage insurance, and around 5% for stamp duty, legal fees and loan costs, every dollar of usable equity supports about four dollars of purchase price. $270,000 covers the upfront money on a property of about $1,080,000, with a new loan of $864,000 for the rest.
Stamp duty is the part that moves most. It varies by state, by price and by whether you will live in the property, so change the purchase costs above to match where you are buying.
Borrowing power still decides it
Using equity means borrowing it. In the example above, the $270,000 drawn from your home is a loan, and so is the $864,000 for the purchase — about $1,134,000 of new borrowing on top of what you already owe. The lender has to be satisfied you can service all of it, at the assessment rate.
For most people, borrowing power runs out before equity does. Run our borrowing power calculator alongside this one: the smaller of the two answers is the one that sets your budget.
How lenders value your property
The value that matters is the lender’s, not yours or a real estate app’s. Valuers work from recent sales of similar homes nearby and tend to be conservative, and every $10,000 of value they cannot find costs you $8,000 of usable equity at 80%. On the example above, a valuation of $850,000 rather than $900,000 leaves $230,000 usable instead of $270,000.
Setting it up properly
- Keep the investment borrowing separate. Draw the equity as its own loan split rather than topping up your home loan. Whether interest is deductible depends on how the money is used, and a separate split keeps the record clean.
- Avoid tying the two properties together. Securing the new loan against both properties — cross-collateralisation — gives the lender control over both when you later want to sell or refinance one. Two standalone loans are usually the better structure.
- Plan for the repayments. Interest on the equity loan starts the day you draw it, often before the new property has a tenant.
This is where structure pays for itself for years. Our investment and mortgage broking teams set it up together, and the Building Wealth through Property guide explains the thinking behind it.
Frequently asked questions
How do I work out my usable equity?
Multiply the property's value by the lender's limit — usually 80% — and subtract what you owe. On a $900,000 home with $450,000 owing, 80% of the value is $720,000, so the usable equity is $270,000. The total equity is $450,000, but lenders will not normally lend against the last 20% of the value without lenders mortgage insurance.
Can I use equity to buy an investment property?
Yes — it is how most Australians buy a second property. The equity is borrowed against your home and used for the deposit and purchase costs, and a second loan covers the rest of the price. $270,000 of usable equity could cover a 20% deposit and 5% costs on a property of about $1,080,000. Both loans have to fit within your borrowing power, though: in that example the new borrowing is about $1,134,000 in total.
Is the interest on an equity loan tax deductible?
It depends on what the money is used for, not on which property secures it. Equity borrowed and used to buy an investment property is generally deductible; equity used for a car, a holiday or renovating your own home is not. Keeping the investment borrowing in its own loan split makes this far easier to prove. Ask your accountant before you draw anything, since mixing purposes in one loan is hard to undo.
Why is the bank's valuation lower than I expected?
Lender valuations are deliberately careful: the valuer is protecting the bank, not selling the house, and relies on recent comparable sales rather than asking prices or online estimates. A lower valuation cuts usable equity by 80 cents for every dollar — on the example above, a valuation of $850,000 instead of $900,000 leaves $230,000 usable rather than $270,000. A broker can often order valuations from more than one lender before you apply.
How much equity do I need to buy an investment property?
Enough to cover the deposit and the purchase costs. To avoid lenders mortgage insurance that is usually a 20% deposit, plus stamp duty and other costs that often come to around 4% to 6% of the price depending on the state — roughly a quarter of the price in all. $150,000 of usable equity would cover that on a property of about $600,000.
Can I use more than 80% of my property's value?
Many lenders will lend up to 90% or more, but above 80% you will usually pay lenders mortgage insurance, which can run to thousands or tens of thousands of dollars. At 90%, the same $900,000 home with $450,000 owing would have $360,000 usable instead of $270,000. Whether the extra is worth the insurance is a question for the whole strategy, not just the purchase.
Want us to run these numbers properly?
A calculator works with the handful of figures it asks for. A strategy session works with your income, your debts, your tax position and what you are actually trying to build. The first one is free.
Book a free consultationOther calculators
Mortgage Repayments
Weekly, fortnightly or monthly repayments on any loan amount, rate and term, including interest-only periods. See the total interest and what a rate rise would cost you.
Open tool →Borrowing Power
Estimate how much a lender could offer you, from your income, expenses and existing debts — tested at the rate plus APRA's 3% buffer, the way banks assess it.
Open tool →Pay Off Your Home Faster
Model extra repayments, fortnightly payments, a lump sum and an offset account against your current loan. See the years cut off your mortgage and the interest saved.
Open tool →