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Equity explained

If you’ve been paying down your mortgage, or your home has increased in value, you’ve probably built up some equity. But what could that mean for you? Unlocking your home equity could allow you to upgrade, make improvements to your home or even invest in a new property. 


Get an indication of how much equity you might have in your home by using our home equity calculator.


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Equity is usually calculated based on a bank valuation of the property, subtracting what you currently owe on your home loan (it’s worth knowing that a bank valuation uses different benchmarks and can be lower than a real estate valuation). So, for example, if the market price of your property is $850,000, and your outstanding loan balance is $500,000, you have up to $350,000 of equity. You can also roughly work out your equity using this calculator.

This is also known as usable equity, as it is the amount you can potentially access.

It’s important to understand that your total equity isn’t necessarily all available for you to use. A lender calculates usable equity as 80% of the value of the property minus the loan balance.

For example, say your home is valued at $800,000 and you have a home loan of $440,000. Your lender will calculate 80% of the value of the property – 80% of $800,000 is $640,000. This means your usable equity would be calculated as $640,000 (80% property value) minus $440,000 (loan size) = $200,000. You may be able to use this amount in the form of a home loan increase or line of credit secured against your usable equity.

Another factor that lenders usually take into account is the borrower's ability to service the loan. Even if you technically have a certain amount of usable equity, if your income, expenses and total liabilities don’t allow you to comfortably repay the full loan amount, then you may be able to only unlock the amount that you can afford, rather than the full amount of equity.

One common use of equity is towards a deposit for a new property.

Homeowners often also use equity to: 

  • Renovate their current home.
  • Invest in shares, bonds, mutual funds or similar financial instruments.
  • Pay off other debts like loans or credit card bills.
  • Cover major expenses, such as medical bills, education or a new car.
  • Fund lifestyle expenses such as a holiday.


Keep in mind that your bank may have limits and conditions in place for how you use your equity, depending on the purpose. Also note that using equity to pay off other debts could mean you have a longer loan term than if you were to focus on paying down those debt accounts individually. Adding these balances to your home loan may result in you paying more interest on the debts over the life of the loan.

One of the main benefits of using equity for big expenses is that you are still charged home loan interest rates for the debt, which may be lower than other loans. The flipside is that using your equity for purchases or short-term projects may increase the term of the loan, which means you may pay more interest over the loan’s life than if you were to use a personal loan with a fixed term.

Most lenders require you to provide proof of your financial situation to correctly understand your borrowing power and also how you’re planning to spend the money when unlocking home equity, to ensure that it is being used responsibly.

Learn more about how to unlock equity here

There are some smart ways in which equity can be bumped up. The most obvious one is paying down your mortgage with additional repayments, which reduces the amount you owe on your loan while increasing the portion of the property that you actually own. If you have a fixed rate loan, keep in mind that there’s a limit on the total amount of additional repayments you can make before break costs apply.3

You can also boost equity by increasing the value of your home proactively – this can be through renovations, extensions or cosmetic improvements. And yes, you can use existing equity to further increase equity, making it a virtuous cycle of sorts.

If the market works in your favour, you may find that you also build equity through asset appreciation – or in other words, an increase in the market value of your property. That is of course not something in your direct control, although it’s a good idea to think strategically about where prices are most likely to go up when researching and buying property in the first place. 

When you refinance your home loan to access equity, you are basically increasing your debt which could lead to increased repayments or a longer loan term – or both. This means you might end up paying more interest in the long run.

You should also think about where the money is going, whether it’s an investment that will pay for itself over time, or a purchase that may see depreciation over time. It’s important to weigh up the pros and cons of different scenarios before making a decision.

It’s also best to think beyond the short term, as you also need to be able to sustain the monthly repayments if interest rates go up in the future. And there are fees and costs attached to home equity loans, which you’ll need to factor in too.

Have any other questions? Explore our home loan products or request a call back talk to your local Home Finance Manager.

Tools and resources

Use equity to renovate your home

You may be able to fund your renovating dreams with a home loan increase, but there are a few things you should think about first.

How to use equity to invest in the share market

You could use your equity enter the stock market and invest in things like individual stocks, managed funds and exchange-traded funds (ETFs).

Things you should know

The above rates exclude any LVR discounts available for new loans. 

The purpose of this calculator is to provide you with general information about the amount of usable equity you have in your property and the estimated loan and monthly repayments required to purchase your next home based on the information you provided. The results generated by this calculator are subject to the disclosures below.

The calculation is not an offer of Credit.

This calculation is not an offer of credit, but an estimate only based on the information you provided of the loan and monthly repayments required to purchase your next property and it does not include all applicable fees. Your borrowing power amount may be different when you complete a full application and we capture all details relevant to our lending criteria. Our lending criteria and basis upon which we assess what you can afford may change at any time without notice. Before acting on this calculation you should seek professional advice.

Any calculation made by you using this calculator is intended as a guide.

Results shown are for illustrative purposes only and are limited to the accuracy of the information provided. All costs shown in the calculator including stamp duty, LMI, marketing costs, real estate agent fees, conveyancer fees, governments fees and all optional costs are estimations only, actual costs could be higher than those estimated.

Interest Rates

All interest rates referred to in the calculators are current, as indicated on our home loan interest rates page. The interest rates represented may include promotional discounts and are subject to change. When assessing ability to service a loan, Westpac may use an interest rate that is higher than the current interest rate for the loan requested.

1Comparison rate: The comparison rate is based on a loan of $150,000 over the term of 25 years. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.


2 The taxation position described is a general statement and should only be used as a guide.  It does not constitute tax advice and is based on current tax laws and their interpretation.

3 Customers can make total prepayments of up to $15,000 (cumulative) for loans fixed prior to 21 March 2009, $25,000 (cumulative) for loans fixed between 21 March 2009 and 16 March 2012 or $30,000 (cumulative) for loans fixed on or after 17 March 2012, without costs or fees applying. Prepayments exceeding this threshold may incur a break cost and administration fee.

If at any time before the end of a fixed rate period you switch to another product, interest rate (fixed or variable) or repayment type, then a break cost and administration fee may apply.

LVR stands for the initial loan to value ratio at loan approval. LVR is the amount of your loan compared to the Bank’s valuation of your property offered to secure your loan expressed as a percentage. Home loan rates for new loans are set based on the initial LVR and don’t change because of changes to the LVR during the life of the loan.


General disclaimers

While the property information available from this page is offered to our customers with the permission of RP Data Pty Ltd, Westpac Banking Corporation accepts no responsibility for the accuracy or completeness of the data. We recommend you seek independent advice before making a decision based on the information. This publication contains data, analytics, statistics and other information supplied to Westpac by RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) (CoreLogic Data). CoreLogic and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property rights) subsisting in any CoreLogic Data. All rights reserved.

The data and information (including commentary) provided in this publication (together, Information) is of a general nature and should not be construed as specific advice or relied upon in lieu of appropriate professional advice. While CoreLogic uses commercially reasonable efforts to ensure the Information is current, CoreLogic does not warrant the accuracy, currency or completeness of the Information and to the full extent permitted by law excludes all loss or damage howsoever arising (including through negligence) in connection with the Information.

*An automated valuation model estimate (AVM Estimate) is a statistically derived estimate of the value of the subject property. An AVM Estimate is generated (i)by a computer driven mathematical model in reliance on available data; (ii) without the physical inspection of the subject property; (iii) without taking into account any market conditions (including building, planning, or economic), and/or (iv) without identifying observable features or risks (including adverse environmental issues, state of repair, improvements, renovations, aesthetics, views or aspect) which may, together or separately, affect the value. An AVM Estimate is current only at the date of publication or supply. An AVM Estimate must not be relied upon as a professional valuation or an accurate representation of the market value of the subject property as determined by a valuer. CoreLogic expressly excludes any warranties and representations that an AVM Estimate is an accurate representation as to the market value of the subject property. To the full extent permitted by law, CoreLogic excludes all liability for any loss or damage howsoever arising or suffered by the recipient, whether as a result of the recipient's reliance on the accuracy of an AVM Estimate or otherwise arising in connection with an AVM Estimate.

Contains property sales information provided under licence from the Land and Property Information (“LPI”). RP Data Pty Ltd trading as CoreLogic is authorised as a Property Sales Information provider by the LPI.