Usable Equity Calculator

Total and Usable Equity

Total equity is the property value less every debt secured by it. Moneysmart's equity definition describes it as an asset's value less any money owing on it. Usable equity is the part you can borrow against at your LVR limit.

To find usable equity, multiply the property value by your LVR limit, then subtract the existing secured debt. The result is $0 when the debt already reaches the limit.

In the starting example, an $800,000 property secures loans of $400,000 and $40,000. Total equity is $800,000 less $440,000, or $360,000. At an 80% LVR limit the debt ceiling is $640,000, so usable equity is $200,000.

The correct method multiplies the $800,000 value by 80% and then subtracts the $440,000 of debt. A common incorrect shortcut takes 80% of the $360,000 total equity instead. Its $288,000 result overstates usable equity by $88,000, because the existing loans already use part of the limit.

A property can also hold negative equity. With $450,000 owing on a $400,000 property, total equity is -$50,000. The 80% ceiling is $320,000, so the debt sits $130,000 above the limit and usable equity is $0.

Enter each balance owing before any offset account money. An offset balance sits beside the loan, so this calculator keeps the full secured debt.

Top-Ups and Existing Loans

A home loan top-up adds new borrowing to an existing loan, so this calculator also works as a home loan top up calculator. Usable equity is the most you could add at your limit. Fees paid from the new borrowing reduce the cash you receive.

With $200,000 of usable equity and $5,000 of fees, $195,000 of top-up funds remains. A proposed $150,000 top-up plus those fees takes the debt to $595,000. That is an LVR of 74.38%, leaving $45,000 below the 80% limit.

Every other loan secured by the property reduces that room. Adding a $10,000 secured balance to the example lowers usable equity to $190,000. Count each debt once. A car loan the top-up will pay out belongs in the proposed borrowing, because the property does not yet secure it.

The arithmetic is the same for a Westpac home loan top-up. Westpac's home loan top-up guide takes 80% of a $500,000 home and subtracts $250,000 owing, leaving $150,000 of usable equity. Westpac's current policy and its assessment of the application decide the amount it would lend.

Valuation and Approval Limits

The property value you enter is an estimate, not a lender valuation. The lender relies on its own valuation, and a lower figure reduces the ceiling at the same LVR. In the example, a $750,000 valuation lowers the 80% ceiling to $600,000 and usable equity to $160,000.

Equity alone does not establish serviceability. The lender also assesses income, savings, living expenses and other debts to decide whether the borrower can repay the larger loan. The borrowing power calculator estimates that separate question.

Borrowing above 80% LVR can involve lenders mortgage insurance (LMI), which adds cost. Use the LVR calculator to test a proposed loan against a target and find the debt reduction needed to reach it.

Property Growth Scenarios

The growth inputs work as a simple property growth calculator. They apply your entered annual rate to today's value, compounding once a year. The result is a planning scenario, not a valuation of any address or a forecast.

At 3% a year for five years, the $800,000 example reaches $927,419. The 80% ceiling rises to $741,935. With debt unchanged at $440,000, usable equity grows to $301,935.

After the proposed $150,000 top-up and $5,000 of fees, $146,935 would remain below the limit in year five. The table shows that amount for each year in the "Left after top-up" column.

Enter a negative rate to test a fall. At -5% a year for two years, the value drops to $722,000 and usable equity falls to $137,600. The $595,000 debt after the proposed top-up would then sit $17,400 above the $577,600 ceiling.

The projection holds debt at today's balance. Principal repayments would increase usable equity over time, and redraws or new borrowing would reduce it.