Equity

Plain-English definition. Equity is the portion of your property that you actually own — the current market value minus the outstanding mortgage balance. It rises as you pay down the loan, as the property appreciates, or both.

How it works in Australia. Equity is the foundation of property wealth-building. Most lenders allow you to access "usable equity" — defined as 80% of the property's value minus the current loan balance — through a top-up, line of credit, or split loan, without LMI. Above 80% requires LMI again. Banks will usually require a fresh valuation before releasing equity. Note that ATO deductibility of interest depends on what the borrowed funds are used for, not what they're secured against — borrowing against your home to buy shares makes that interest deductible.

Concrete example. You bought a Brisbane home for $620,000 in 2020 with a $500,000 loan. By 2026, the property is valued at $850,000 and your loan balance is $440,000. Total equity = $410,000. Usable equity = (80% × $850,000) − $440,000 = $240,000. You can borrow up to that without LMI, perhaps as a 20% deposit on a $1.2m investment property.

Common confusion. Total equity is not the same as usable equity — banks won't release the LMI-free 20% buffer. Equity also isn't cash until you actually borrow against it or sell. Many homeowners feel "wealthy on paper" without having any of that wealth available to spend. And accessing equity is still taking on debt, with full serviceability assessment required.