What Home Equity Means
Home equity is the difference between a property's current value and the debt secured against it.
Total equity = property value - current mortgage balance
If a lender values a home at $1,000,000 and the mortgage balance is $600,000, total equity is $400,000. That is a balance-sheet figure. It is not cash in an account and it is not an approved loan limit.
The second calculation is the loan-to-value ratio, usually shortened to LVR:
LVR = mortgage balance / property value x 100
ASIC Moneysmart defines LVR as the loan amount expressed as a percentage of the value of the asset. In the same example, $600,000 divided by $1,000,000 gives a 60% LVR.
Equity Above a Chosen LVR
People often search for usable equity. That phrase can sound more certain than it is, because only a lender can decide whether additional borrowing is available.
This calculator instead reports equity above a chosen LVR. At an 80% planning LVR, the formula is:
Property value x 80% - current mortgage balance
For the $1,000,000 home with a $600,000 balance:
- 80% of the entered value is $800,000;
- the current balance is $600,000;
- the mathematical gap is $200,000;
- the remaining 20% equity buffer is also $200,000.
This does not mean a lender will advance $200,000. The lender may use a lower valuation, cap the LVR for the property or loan purpose, require lenders mortgage insurance, or approve less after assessing repayments.
Worked Example With Extra Borrowing
Assume the same $1,000,000 lender value and $600,000 mortgage balance. Enter an extra borrowing scenario of $125,000.
The modelled balance becomes $725,000 and the resulting LVR becomes 72.5%. The remaining mathematical gap to an 80% LVR is $75,000.
Repayments still need separate modelling. Use the Mortgage Repayment Calculator for the enlarged balance and the Borrowing Power Calculator for a general serviceability estimate. Neither tool is a lender assessment.
Why a Lender Result Can Differ
The property value can change
A lender can order a valuation rather than use an agent appraisal, automated estimate or recent nearby sale. If the lender uses $900,000 instead of $1,000,000, a $600,000 balance has a 66.67% LVR rather than 60%.
The target LVR is not a right
An 80% LVR is a common planning marker because many standard loans above it may involve LMI. It is not a universal approval threshold. Apartments, unusual properties, some postcodes, investment purposes and lender policy can produce a lower maximum LVR.
Serviceability still applies
APRA confirmed in May 2026 that the mortgage serviceability buffer remains 3 percentage points for regulated banks. APRA also kept limits on the share of new lending at debt-to-income ratios of six times or more. These are system and lender settings, not promises about an individual application.
Lenders also consider verified income, living expenses, existing commitments, dependants, credit limits, repayment history, loan term and product rules.
More debt changes the risk
Borrowing against equity increases the loan balance and repayment burden. If the property value falls, the LVR rises. If income drops or rates rise, the larger debt can become harder to service.
Common Mistakes
- Treating an online estimate as a valuation. Use a recent lender valuation where available and test a lower-value scenario.
- Calling all equity usable. Total equity includes the buffer that remains in the property. This tool labels the mathematical amount above a chosen LVR separately.
- Ignoring other secured loans. Include fixed splits and other debts secured by the property where relevant.
- Forgetting purchase and borrowing costs. Stamp duty, refinance costs, LMI and establishment fees can reduce the cash available for another purpose.
- Using equity as an affordability test. Equity does not show whether repayments fit the household budget.
Sources and Limitations
- ASIC Moneysmart: loan-to-value ratio, checked 17 July 2026.
- APRA: macroprudential settings maintained, published 28 May 2026 and checked 17 July 2026.
This calculator provides general information only. It is not a property valuation, loan quote, credit assessment, approval or recommendation. Results depend on the values entered. Lender valuations, serviceability, income, expenses, DTI, LMI, credit history, product policy and the security property can change the outcome.
