Illustrative home-equity projection
Modelled property value minus projected secured debt
Australia · AUD
See How Much of Your Home's Value Is Yours
Estimate your current home equity, explore potential borrowing room at a selected LVR and see how additional secured debt could affect your position.
Effect of changing the property value
Illustrative equity after the proposed borrowing and immediate mortgage paydown
| Value change | Property value | Secured debt | Gross home equity | Equity percentage | Combined LVR |
|---|
Year-by-year scenario
Based on your selected annual property-value change and fixed mortgage-paydown assumptions
| Year | Property value | Existing secured debt | New borrowing | Total debt | Gross home equity | Combined LVR |
|---|
This calculator provides a general planning illustration only. It is not a property valuation, loan approval, credit decision or offer to lend. A lender may assess your income, expenses, credit history, loan purpose, property, valuation and ability to make repayments. Borrowing against your home may put the property at risk if you cannot meet the loan obligations.
Guide for Australian homeowners
Understanding the equity in your property
Home equity represents the difference between an estimated property value and the total debts secured against that property. For example, if a home is valued at $840,000 and the secured debts total $495,000, the estimated gross equity is $345,000.
This amount is not necessarily the cash an owner would receive after selling. Agent commissions, legal fees, discharge costs and other sale-related expenses can reduce the final proceeds. It is also not a guaranteed borrowing amount, as lenders assess equity differently and apply their own credit criteria.
Equity may grow when the mortgage principal is repaid or when the property increases in value. It may shrink if the property declines in value or if additional debt is secured against it.
Estimating possible borrowing room from equity
A common planning method is to choose a loan-to-value ratio (LVR), apply it to the estimated property value and subtract existing secured debt. MoneySmart defines LVR as the loan amount expressed as a percentage of the value of the asset securing it. See the MoneySmart definition of loan-to-value ratio .
Using an 80% planning LVR for a property valued at $840,000 produces an illustrative debt level of $672,000. Subtracting $495,000 of existing secured debt leaves $177,000 of theoretical borrowing room:
$840,000 × 80% − $495,000 = $177,000
This is a scenario, not an approval. A lender may use a different valuation, apply a different maximum LVR or approve a smaller amount after assessing income, living expenses, liabilities, credit history and the purpose of the loan. Borrowing at a high LVR may also involve lenders mortgage insurance (LMI) or additional conditions.
Separate loan split
Some lenders place additional borrowing in a separate loan account. This can make the purpose, balance and repayments easier to track than combining everything into one undivided loan.
Refinancing with additional funds
Refinancing may replace the existing mortgage and provide extra approved borrowing. Compare the new interest rate, loan term, discharge costs, application fees and any break costs before proceeding.
Line of credit
A line of credit allows approved funds to be drawn, repaid and potentially drawn again. Its flexibility can make debt easier to retain, so its rate, fees and repayment discipline should be compared with a structured loan split.
Reverse mortgage or equity release
Reverse mortgages and equity-release products work differently from ordinary home-loan increases. Interest and charges may be added to the balance, causing the debt to grow over time rather than decline through regular repayments.
Repayments, loan terms and the cost of using equity
The calculator provides either a principal-and-interest repayment illustration or a simplified interest-only estimate, depending on the borrowing type selected. A principal-and-interest payment gradually reduces the balance. An interest-only payment does not reduce principal unless extra repayments are made.
Extending debt over a longer period can reduce the immediate monthly payment but increase the total interest paid. MoneySmart warns that consolidating shorter-term debts into a mortgage can cost more overall and places the home at risk if repayments cannot be made. Read its debt consolidation and refinancing guidance .
MoneySmart also explains the differences between principal-and- interest and interest-only home loans in its guide to choosing a home loan .
Why the lender’s property valuation matters
The property value entered into the calculator is only an estimate. A lender may obtain an automated, desktop or physical valuation and use that figure in its LVR calculation. If the accepted value is lower than expected, the calculated equity percentage falls and the apparent borrowing room becomes smaller.
The sensitivity table demonstrates this relationship by adjusting the property value while holding secured debt constant. It can show how a market decline might raise LVR even though the dollar amount of debt has not changed.
How to interpret the future-equity projection
The projection compounds the annual property-value assumption and applies the annual mortgage reduction entered by the user. It is a mathematical scenario rather than a prediction of future house prices or a lender-issued repayment schedule.
Actual property values can rise, remain flat or fall. Mortgage balances may also change differently because of interest-rate movements, redraws, offset balances, extra repayments, fees and loan changes. Testing conservative as well as optimistic assumptions can provide a broader view of risk.
For a focused ratio calculation, use the Australian LVR calculator . To examine repayments and total interest on a mortgage, use the Australian mortgage calculator .
Reverse mortgages require a different assessment
A reverse mortgage generally allows an eligible homeowner to access part of the value in a property without making ordinary scheduled repayments. Interest and fees may be added to the balance, so the amount owed can increase and the remaining equity can decline.
This calculator does not model reverse-mortgage compounding, age-based limits or product safeguards. Before considering this form of equity release, read the MoneySmart reverse mortgage and home equity release guide and consider independent financial and legal advice.
Australian home equity questions
My home has increased in value. Can I withdraw the whole increase?
Not automatically. A lender will usually apply an LVR limit and then assess income, expenses, existing debts, credit history and loan purpose. Its valuation may also differ from your estimate.
Why is my estimated borrowing room smaller than my total equity?
Total equity measures the difference between property value and secured debt. Borrowing room normally leaves part of that equity untouched so the resulting loan remains within the selected LVR.
Will a bank use the price estimate from a property website?
Not necessarily. Online estimates can be helpful for initial planning, but a lender may use its own automated or professionally prepared valuation when making a credit decision.
Could renovations create more equity than they cost?
They might, but the result is not guaranteed. The effect depends on the type and quality of the work, local buyer demand, construction costs and the valuation method used after completion.
What happens to my LVR if property prices fall?
The LVR rises when the property value falls and the loan balance remains unchanged. A sufficiently large decline could remove borrowing room or create negative equity.
Is it safer to keep more equity than a lender requires?
Keeping a larger buffer may provide more protection against falling property values and unexpected expenses. The appropriate buffer depends on your finances, risk tolerance and future plans.