How the numbers are worked out
LVR (loan-to-value ratio) is the total of the loans secured by the property divided by its value. A $400,000 loan on a $750,000 home is an LVR of about 53.3%.
Equity is the value less the loans: $350,000 in that example.
Usable equity at 80% is 80% of the value less the loans. In the example, 80% of $750,000 is $600,000, so the loans could total about $600,000 at an 80% LVR, which is about $200,000 more than now. That's the figure people usually mean when they talk about using equity for renovations, an investment property or the next home.
What it can't tell you
- A lender's valuation may be lower than your estimate, which lowers the usable equity.
- Having equity doesn't mean you can borrow it. The lender still checks your income, expenses and other debts.
- Borrowing above 80% of the value usually means lenders mortgage insurance, and some lenders set lower limits for some properties or postcodes.
- How you structure a top-up or a new loan matters for tax and for your next purchase. Talk to your accountant and a broker.
Thinking about using equity to invest? See our investment loans page, or compare your current rate with the refinance savings calculator.
Common questions
What is a good LVR?
There's no single answer, but 80% or less is a common threshold because lenders mortgage insurance usually applies above it. A lower LVR can also mean more lenders and options are open to you.
Can I borrow all of my usable equity?
Not necessarily. Usable equity shows how much the loans could total at your target LVR. A lender still checks whether you can afford the larger loan, uses its own valuation and applies its own limits.
Why does the calculator use 80%?
It's a common LVR above which lenders mortgage insurance usually applies. You can change the target LVR to see a different figure. General information only – speak to a broker about your situation.