How to Calculate the Usable Equity in Your Home

The short answer

In Australia, usable equity is generally 80% of your home's current value minus your outstanding loan balance. Lenders usually let you access equity only up to an 80% loan-to-value ratio (LVR) without triggering lenders mortgage insurance. So if your home is worth $800,000 and you owe $440,000, your usable equity is (0.80 × $800,000) − $440,000 = $200,000.

How usable equity works

Your total equity is simply your property's value minus what you still owe. But you can't usually borrow against all of it. Lenders cap how much they'll lend against a property at around 80% of its value before requiring LMI, so the slice you can actually tap (your usable equity) is smaller than your total equity.

The formula is:

Usable equity = (Property value × 80%) − Current loan balance

Three things drive the number:

• Property value. Most lenders rely on their own valuation, which can be more conservative than an agent's appraisal or what a portal estimates.
• Your loan balance. Paying down principal, making extra repayments, or holding an offset balance all change how much you owe (or effectively owe).
• The 80% line. You can sometimes borrow above 80% by paying LMI, but the "usable" figure deliberately stops at 80% because that's the LMI-free threshold most people target.

Usable equity is commonly used as the deposit (plus costs) for a second or investment property, or to fund renovations.

Worked example

Say your home has grown in value and you've been paying down the loan:

Input	Value
Current property value	$800,000
Outstanding loan balance	$440,000
80% of property value	$640,000
Usable equity	$200,000
Total equity (value − loan)	$360,000

The maths is checkable: 0.80 × $800,000 = $640,000, then $640,000 − $440,000 = $200,000.

Notice usable equity ($200,000) is well below total equity ($360,000). The $160,000 gap sits in the top 20% of the property's value that lenders ring-fence for LMI-free lending.

What that $200,000 unlocks. As a rough rule, useable equity can fund roughly 20% of a new purchase plus its buying costs. So $200,000 might support a next purchase around the $800,000-$1,000,000 mark once you allow for stamp duty and fees, though your actual borrowing power also depends on income and serviceability, which is a separate test entirely.

A first-home note. If you're buying your first home rather than tapping equity, you don't need 20% at all. The First Home Guarantee lets eligible buyers purchase with a 5% deposit and no LMI (the government guarantees the gap). From 1 October 2025 it has no income test, no place limit, and higher price caps: $1.5m in Sydney, $950k in Melbourne, $1m in Brisbane.

Model this in True Loan

Open the True Loan calculator and watch your equity grow on the timeline:

1. Set your loan amount and property value so today's LVR is right. The timeline projects remaining debt, property value, equity and LVR year by year.
2. Set a property growth rate assumption. This drives how fast value (and therefore usable equity) rises over time.
3. To pay the loan down faster and lift usable equity sooner, use the Extra repayment ($/month) input, or model a sustained Offset balance (these are two separate inputs: offset reduces the interest you accrue without reducing the recorded loan balance).
4. Read usable equity off the timeline at any future year by taking 80% of the projected value and subtracting the projected debt.

Comparing "keep the offset" against "make extra repayments" to see which builds tappable equity faster? Use the comparison tool; every scenario is shareable via its URL.

For the mechanics behind the 80% line, see what LVR is and how to calculate it. To use equity for a next purchase, see how much equity you need to buy a second/investment property, and to project forward, how much equity you'll have in 10 years.

Common questions and mistakes

Is usable equity the same as total equity? No. Total equity is value minus loan. Usable equity stops at 80% of value, so it's always smaller while you still have a mortgage.

Can I access more than 80%? Sometimes you can, but borrowing above 80% usually means paying LMI again on the new lending, which is why the "usable" figure conservatively stops at 80%.

Does an offset balance count as equity? Not directly. An offset reduces the interest you pay and effectively your net debt, but lenders assess usable equity off your actual loan balance and their valuation, not your offset.

Whose valuation matters? The lender's. A portal estimate or agent appraisal is a starting point only; lenders order their own (often more conservative) valuation.

Having equity doesn't guarantee approval. You still have to pass serviceability: income, expenses and a serviceability buffer. Equity is necessary, not sufficient.

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Figures here are estimates for the 2025-26 financial year and may differ from your lender's valuation and policy. Check official sources such as moneysmart.gov.au, Housing Australia and your lender. This is general information, not financial or credit advice.