Rising property values across Australia have created a significant amount of untapped equity in many homeowners' properties. Equity is the difference between what your property is worth and what you owe — and through refinancing, many Australians are accessing this equity to fund home renovations, investment property deposits, share purchases, or debt consolidation. But equity access is not without risk. Here is what you need to understand before proceeding.
What Is Equity and How Is It Calculated?
Equity is the difference between your property's current market value and your outstanding loan balance. If your home is worth $900,000 and you owe $420,000, your total equity is $480,000. However, the equity you can actually access is typically limited to 80% of the property's value minus the outstanding loan: ($900,000 × 80%) − $420,000 = $720,000 − $420,000 = $300,000 of usable equity.
The 80% limit exists because most lenders will not take the LVR above 80% without LMI when providing equity access refinancing. Some lenders will go to 90% LVR with LMI, but the cost of LMI on the equity release must be weighed carefully. The property must be formally valued by the lender (at your cost, typically $300–$600) to determine the accessible equity amount.
Equity Is Not Guaranteed — It Depends on the Valuation
Your equity is only worth what a lender's valuer says the property is worth — not what you think it is worth, or what recent comparable sales suggest. If the valuation comes in lower than expected, your accessible equity reduces accordingly. Always base equity access plans on a conservative property value estimate, not the optimistic end of comparable sales.
How Equity Access Through Refinancing Works
Equity access is typically achieved by refinancing to a new lender (or with your existing lender) at a higher loan amount — the increase in the loan represents the equity you are accessing. There are two common structures: a cash-out refinance (the entire loan is restructured at the higher amount, and the difference between the old loan and new loan is paid to you); or a separate home equity loan or line of credit secured against the same property.
The most common use cases in Australia are: investment property deposit (the accessed equity provides the deposit for an additional property purchase); home renovation (renovations that add value to the property are often self-funding over time); share or managed fund investment; and debt consolidation (replacing high-interest personal debt with lower-rate mortgage debt). The purpose of the equity access matters for tax deductibility — consult your accountant.
- ✓Investment property deposit — access equity to fund your next purchase without saving separately
- ✓Renovation funding — upgrade your existing property using equity it may already have
- ✓Share or fund investment — leverage property equity for broader investment strategy
- ✓Debt consolidation — replace high-rate debt with lower mortgage rate (with caution)
- ✓Education or significant expenses — access long-term savings at low cost
The Key Risks of Accessing Your Property Equity
Accessing equity increases your loan balance and your monthly repayments. If you use equity for non-income-producing purposes (renovation, lifestyle, debt consolidation), the increased loan balance is not generating returns to offset the additional interest cost. Property values can also fall — if you access $200,000 of equity and values subsequently drop 10%, you are in a worse position than you started.
For investment purposes, using equity as a deposit means you are borrowing 100% of the investment property's cost across two properties — creating a highly leveraged position. This magnifies both gains and losses. If both properties fall in value simultaneously, your net equity position could be materially negative. Ensure your cash flow (rental income minus loan repayments) supports the total debt load before proceeding.
Keep Investment and Personal Debt Separate
If you access equity for investment purposes, structure the equity release as a separate loan split — not as part of your owner-occupied mortgage. This keeps the investment interest (which may be tax deductible) separate from your non-deductible personal mortgage interest. Mixing these creates a 'contaminated loan' that is difficult to apportion for tax purposes. Your accountant and broker should coordinate on this structure.
Frequently Asked Questions
About the Author
Sakib Manzoor
Senior Finance Wellness Expert
Sakib Manzoor is the founder of Secure Finance and brings extensive experience in Australian mortgage broking and financial wellness. Specialising in helping clients achieve their property finance goals through personalised strategies and expert guidance, Sakib is FBAA accredited and committed to providing clear, actionable advice. All content is written to meet Australian regulatory standards and is regularly updated to reflect current market conditions.