How much equity can I release from my home?

Usable-equity example

If the lender values a home at $800,000 and the current secured loan is $400,000, 80% of the value is $640,000. The indicative usable equity is therefore $240,000 before transaction costs and subject to approval.

• The lender uses its valuation, not necessarily an online estimate.
• Income, expenses and existing debts limit borrowing capacity.
• The purpose of the released funds must be acceptable.
• Higher borrowing increases repayments and puts more equity at risk.

Equity is not cash automatically

Equity is ownership value. Releasing it means taking a new loan or increasing an existing one. The usable amount can therefore be much lower than total equity if serviceability, policy or valuation does not support the request.

Total equity and usable equity

If a home is worth $800,000 and the mortgage is $400,000, total equity is $400,000. That does not mean the owner can borrow the entire $400,000. Using an 80% planning limit leaves $240,000 of indicative usable equity because the total secured debt would be capped at $640,000. The lender may permit a different LVR, but higher leverage can change pricing, policy and LMI. Purchase costs or existing second mortgages also need to be considered.

The purpose affects the structure

Equity may be released for renovation, investment, business funding, debt consolidation or another acceptable purpose. The lender can request quotes, contracts, statements or a clear explanation, particularly for larger cash-out amounts. Separate loan splits can make repayments and purpose tracing easier. If borrowed money is intended for investment or business use, obtain tax advice before funds are mixed with personal spending because deductibility generally follows the use of the money, not the property securing it.

Risk increases with the loan

Releasing equity increases debt secured against the home. Model the new repayment, total interest and the impact of a rate rise. If the funds support another property or a business, test what happens if rent falls, costs rise or business income weakens. A lender's approval is not a recommendation to borrow the maximum. Keep a cash buffer and choose a repayment period that matches the purpose rather than automatically spreading every expense over a 30-year mortgage.

Questions to ask before you proceed

• What valuation and maximum LVR will the lender use for the proposed purpose?
• How much additional debt is affordable after all existing commitments are assessed?
• Should the released funds have a separate loan split and repayment period?

Official guidance: ANZ: Calculating usable equity

This is general information, not personal financial, tax or legal advice. Lending criteria, fees and eligibility vary.

Related questions

• Why is a bank valuation different from market value?
• When is refinancing actually worth it?
• How much does refinancing cost in Australia?