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. A common planning estimate for "usable equity" is 80% of the lender's property valuation minus the current loan balance. That is not an approval limit: the lender still assesses income, expenses, credit, product policy and the property. Borrowing above 80% LVR may involve LMI or another form of additional security. For tax, interest deductibility generally depends on the use of the borrowed funds rather than the security, but tracing, mixed-purpose loans and private use can change the result. Check with a registered tax agent.

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.