There’s no doubt about it. Our homes are a great investment! Especially over recent years, which have seen double-digit price growth. 

National home prices have surged 50.6% in the past five years, and 6.2% over the past year which has added around $54,100 to the value of the median home according to realestate.com.au¹. 

As the table below shows, this growth can be as high as $93,700 annually depending on where you live.

All that juicy home equity can be a powerful resource – especially if you’re keen to invest in a rental property. 

But when it comes to using home equity to invest, it’s important to know just how much lenders will look on as ‘available’ equity. 

What is ‘useable’ equity? 

Okay, let’s start with the basics. 

Home equity is the difference between the value of your home and how much is remaining on your home loan. 

For example, let’s say Nicky’s place is worth $800,000, and she has $200,000 left owing on her mortgage. 

In this case, Nicky has home equity of $600,000. 

However, that doesn’t necessarily mean Nicky can use the full $600,000 in equity to fund a rental property. 

Here’s why. 

The golden rule many banks follow is that they are comfortable lending up to 80% of your home’s value less the amount remaining on your home loan. 

In Nicky’s case, a lender will likely look at 80% of her home’s current value. That works out to $640,000 (80% of $800,000). 

Remember though, Nicky still has $200,000 owing on her mortgage. This means her ‘usable equity’ is $440,000 – calculated as $640,000 minus Nicky’s outstanding loan balance of $200,000. 

It’s not just about buying a rental property 

Your usable equity isn’t just a handy resource to buy a rental property. 

You can also use it to upgrade to a new car, complete some home renovations, or tick off goals that matter to you like buying that 4WD caravan to enjoy the road trip of a lifetime.

Talk to us 

To know how much equity you can use to tick off your personal bucket list, call us on 1300 13 14 65. We’ll help you choose the right loan for your needs.