What is equity?

Everything you need to know about equity, from how to build it and what it's used for.

Equity is the amount of the property that you own outright. It is calculated by subtracting the amount owed on a home loan from the property's current value.  For example, if your property is worth $500,000 and you have a home loan with an outstanding balance of $400,000, you would have $100,000 of equity in the property.

Why is equity important?

Home loan equity can be important for borrowers in Australia as it can impact their borrowing power and their ability to access additional funds.  Lenders may view borrowers with a high level of equity in their property as less risky, meaning they may be able to borrow more money or secure a better interest rate.  Equity is an important part of calculating loan to value ratio (LVR).

How to build equity

The two most common ways to build equity are by increasing your property’s value and or by repaying your home loan as quickly as possible.

Your property’s market value can change over time and if you are able to increase it by renovating or making other changes that buyers may find more attractive you are able to generate more equity in your property.

Making additional repayments can help to pay off your loan faster. This can be done by making additional repayments or changing the frequency of your repayments. Unloan offer unlimited additional repayments for no extra fee, along with fee free redraws if you need to access your money again.

What can equity be used for?

Once you’ve built up some equity in your property, it can be used in a number of ways such as to fund renovations, a deposit on another home, to make investments or another major purchase.  Equity can be accessed from redrawing additional repayments or by applying for a home loan top up, which allows you to borrow additional funds against the increased value of your house without having to take out a new loan.

Want to top up additional funds after you got your Unloan home loan? The minimum amount you will be able to top up is $10,000. Total borrowings per customer across all Unloan loans is limited to $10,000,000. Learn more here.

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This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍

This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.

Unloan is a division of Commonwealth Bank of Australia.

Applications are subject to credit approval; satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000.

^ Unloan offers a 0.01% per annum discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. This discount is applied to each loan that you have with Unloan. If you have multiple loans (e.g. one investor and one live-in loan), they will each have a discount calculated based on when you settled each loan. Unloan may withdraw this discount at any time.

There are no fees from Unloan. However, there are some mandatory Government costs depending on your state when switching your home loan. For convenience, Unloan adds this amount to the loan balance on settlement.

* Other third-party fees may apply. Government charges may apply. Your other lender may charge an exit fee when refinancing.

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Calculations are not a loan approval. Applications are subject to credit approval, satisfactory security and minimum deposit requirements. Full terms and conditions will be set out in our loan offer, if an offer is made.

^Rates shown are inclusive of a 0.01% p.a. discount off our reference rate. On each anniversary of your loan’s settlement date, you will receive an additional discount of 0.01% per annum, up to a maximum discount of 0.30% per annum. For purchase loans with a Loan to Value Ratio (LVR) between 80.01% - 90% LVR, a lenders mortgage insurance (LMI) premium and higher interest rate apply. In some cases depending on the property’s location or type, LMI may also be required for LVR between 70.01% and 80%.

*Comparison rate is calculated on a $150,000 secured loan over a 25 year term. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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