What is equity?

Home equity is the portion of your property you own outright. It’s the difference between your property’s current market value and your remaining home loan balance.

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Equity grows as you repay your loan and as your property increases in value. It determines how much you could borrow against your home for renovations, investing, or refinancing.

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With Unloan, you can build equity faster through unlimited extra repayments at no extra cost - and access those funds via fee-free redraw whenever you need them.

What is home equity?

Home equity is the portion of your property you own outright. You calculate it by subtracting your remaining loan balance from your property’s current market value.

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For example, if your property is worth $800,000 and you owe $500,000, your equity is $300,000. That $300,000 represents your ownership stake in the property.

How does equity increase over time?

Equity increases in two ways: repaying your loan and property value growth.

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Every home loan repayment reduces your outstanding balance, which increases your equity. The faster you repay, the faster your equity grows.

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Property value growth also builds equity automatically. If your home’s market value rises by $50,000, your equity increases by $50,000 - even if your loan balance stays the same.

Potential strategies to build equity faster

You can accelerate equity growth with a few straightforward strategies:

• Make extra repayments - Even an additional $200/month on a $500,000 loan can save tens of thousands in interest and cut years off your loan term. With Unloan, extra repayments are unlimited and free.
• Switch to fortnightly payments - this is one of the simplest ways to pay off your loan sooner if your lender calculates fortnightly repayments as being half of the monthly repayment amount. As there are 26 fortnights in a year, making fortnightly repayments could result in making the equivalent of an extra month of repayments each year, depending on how your lender calculates repayments.
• Use a redraw facility - Park spare cash in your loan via extra repayments, then redraw if you need the funds. Unloan offers fee-free unlimited redraw, so your money stays flexible.
• Renovate strategically - Kitchen and bathroom upgrades, landscaping, and energy-efficiency improvements tend to add more value than they cost. Avoid overcapitalising by researching comparable sales in your area.

How do you calculate home equity?

Home equity uses a simple formula: property value minus remaining loan balance equals equity.

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For example:

Property value: $900,000

Loan balance: $600,000

Equity = $300,000

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This $300,000 represents your ownership stake in the property. You can use Unloan’s borrowing power calculator to estimate how this equity affects your borrowing options.

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Usable equity is the portion of your total equity that a lender will let you borrow against. Most lenders cap borrowing at 80% of your property’s value to avoid Lenders Mortgage Insurance (LMI).

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The formula: (property value × 0.80) minus remaining loan balance = usable equity.

Worked example - calculating usable equity

Property value: $800,000

80% of property value: $640,000

Remaining loan balance: $500,000

Usable equity: $640,000 – $500,000 = $140,000

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In this example, you could potentially borrow up to $140,000 against your property without triggering LMI. You could use this as a deposit on an investment property, fund renovations, or consolidate higher-interest debt.

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With Unloan, there are no application fees or ongoing fees when accessing your equity through refinancing.*

How does equity relate to loan-to-value ratio (LVR)?

Equity and LVR are two sides of the same coin. LVR measures what percentage of your property’s value is funded by the loan. The remainder is your equity.

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For example:

Property value: $800,000

Loan balance: $640,000

LVR = 80%

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This means you have 20% equity ($160,000) in the property. An LVR at or below 80% is the threshold most lenders use to avoid requiring LMI.

Equity vs. LVR at a glance

How can equity affect borrowing capacity?

Higher equity gives you more borrowing flexibility. Lenders use your equity as security when you apply for a new loan or top up an existing one.

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However, equity is only one factor. Lenders also assess your income, expenses, existing debts, and credit history. A strong equity position combined with stable income gives you the best chance of approval.

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Unloan’s borrowing power calculator lets you estimate how much you could borrow based on your full financial picture - not just your equity.

What can you use home equity for?

Once you’ve built enough usable equity, there are several ways to put it to work:

• Buy an investment property - Use your equity as a deposit instead of saving from scratch. With $140,000 in usable equity, you could potentially purchase an investment property worth around $700,000 (using the “rule of four” as a rough guide).
• Renovate your home - Access your equity to fund renovations that may increase your property’s value further. Kitchen and bathroom upgrades tend to deliver the strongest returns.
• Consolidate debt - Roll high-interest credit cards or personal loans into your home loan at a lower rate. Be aware this extends the term of those debts, so make extra repayments to offset the difference.
• Refinance for a better rate - If your equity has grown, you may qualify for a lower interest rate. With Unloan, there are no application fees, no ongoing fees, and a loyalty discount that grows each year.

Home equity vs. redraw facility - what’s the difference?

Home equity and a redraw facility are related but different. Equity is the total value you own in your property. A redraw facility lets you access extra repayments you’ve already made on your loan.

At Unloan, there are no limits on how often you can access your redraw. There’s no minimum redraw amount and no fees. You can redraw online anytime through the Unloan app.

Why is equity important for homeowners?

Equity is important because it represents real wealth you’ve built in your property. It’s not just a number - it directly affects what you can do financially.

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Higher equity can help you avoid LMI, qualify for lower interest rates, and access funds for major purchases or investments. For most Australian homeowners, their property is their single largest asset.

Can you lose home equity?

Yes. Your equity can decrease if your property’s market value falls or if you borrow more against your home.

In rare cases, a significant drop in property value can lead to negative equity - where you owe more than your property is worth. This can limit your ability to refinance or sell without a loss.

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To protect your equity position, avoid over-borrowing and maintain a buffer. Making consistent repayments - or extra repayments when you can - helps keep your LVR low and your equity strong.

Estimating borrowing capacity before accessing equity

Before you access your equity, run the numbers. Know how much you can borrow and what your repayments will look like.

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Unloan’s borrowing power calculator estimates how much you could borrow based on your income, expenses, and existing debts. The repayment calculator shows what your monthly repayments would be under different loan scenarios.

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With Unloan, there are no application fees or no ongoing fees. That means you can estimate your borrowing needs without Unloan fees adding to your costs. Government charges, third-party fees and LMI may still apply in some circumstances.*