In short: This calculator shows your total equity (property value minus loan balance) and, more importantly, your usable equity: 80% of your property's value minus what you owe. That 80% line is the rule of thumb, because lenders will let you borrow up to it without lenders mortgage insurance. A Melbourne home worth $900,000 with a $520,000 loan holds $380,000 of total equity but $200,000 of usable equity.
- Total equity$370,000
- Current LVR56.5%
- Max loan at 80% LVR$680,000
- Could fund a 20% deposit + costs on a property worth about$800,000
Lenders confirm value with their own valuation and you must still service the extra borrowing.
Usable equity: $200,000
That is a general estimate on standard assumptions. Every lender applies its own expense benchmarks, income shading and policy, so the real figure moves from lender to lender. Gorakh spent years as a senior credit officer deciding exactly these questions. Send him the numbers above and he will tell you what is realistic and which lenders fit — at no cost to you for home loans.
- A former senior credit officer reads itGorakh assessed loan applications on the lender side before he became a broker.
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Equity is the engine behind most second-property purchases in Melbourne's north, where many owners in Greenvale, Craigieburn and Mernda can fund an investment deposit without touching savings.
How this calculator works
Total equity
Current market value minus your loan balance. Value means a bank valuation, not the neighbour's asking price, so test a conservative figure.
Usable equity
Property value multiplied by 80%, minus your loan balance. Lending to 80% keeps the combined loan under the LMI threshold. Some lenders go to 90% with LMI, and the calculator can show that scenario, but the premium often runs to several thousand dollars.
What it could fund
The tool translates usable equity into a purchase budget using the 20% deposit plus costs rule. Victorian duty on a $550,000 investment purchase is $28,070, so roughly 25% of the price is needed to buy without LMI. It also shows the repayment on the equity loan using the standard amortisation formula over 30 years.
How to use the result
Usable equity tells you what the security can support. Servicing the extra debt is a separate test, run at your rate plus 3%, so pair this result with the borrowing power calculator. If you plan to invest, keep the equity release as a separate loan split so deductible investment interest stays apart from non-deductible home debt. The mechanics are covered in how to use equity to buy an investment property.
Worked example
A Greenvale house valued by the bank at $900,000 with a $520,000 loan. The owners want to buy a $550,000 investment unit in Epping. For illustration, at 6.00% p.a.
| Item | Amount |
|---|---|
| Property value | $900,000 |
| Existing loan | $520,000 |
| Total equity | $380,000 |
| 80% of value | $720,000 |
| Usable equity | $200,000 |
| Investment purchase price | $550,000 |
| 20% deposit needed | $110,000 |
| Land transfer duty (investor rate) | $28,070 |
| Conveyancing, inspections, fees (allowance) | $3,000 |
| Equity required | $141,070 |
| Equity remaining after purchase | $58,930 |
| New investment loan (80%) | $440,000 |
| Combined lending | $1,101,070 |
The couple releases $141,070 against their home as a separate split, then borrows $440,000 against the Epping unit. Both properties stay at or below 80% LVR, so no LMI is payable. The equity split costs about $846 a month over 30 years, on top of the investment loan.
What this calculator doesn't include
- Serviceability: your income must still cover both loans at the buffered rate.
- Valuation shortfalls; bank valuations regularly come in below owners' expectations.
- Discharge, application and valuation fees on the new loan.
- Tax treatment of the released funds, which depends on what they are used for.
- Cross-collateralisation risk if one lender holds both properties as a single security.
Tips to improve the outcome
- Order a free upfront valuation through your broker before you plan around a number.
- Pay down your home loan with an offset or extra repayments; every $10,000 off the balance is $10,000 more usable equity.
- Above 80% LVR, ask whether the lender waives LMI for your profession.
- Keep investment and home debt in separate splits so the ATO can see which interest is deductible. Guidance at ato.gov.au.
Frequently asked questions
How much equity do I need to buy an investment property?
Roughly 25% of the investment property's price: 20% for the deposit plus about 5% for Victorian duty and costs. For a $550,000 purchase that is about $141,000 of usable equity. If you accept LMI on the investment loan you can get by with a 10% deposit plus costs, or around $85,000, but the insurance premium adds to the cost.
Can I use equity without refinancing?
Often yes. Many lenders offer a top-up or additional loan split with your existing bank, avoiding discharge fees and a full refinance. If your current rate is uncompetitive, refinancing to release equity at the same time can be the better move. Compare both paths on the refinance calculator.
Does using equity increase my repayments?
Yes. Released equity is new borrowing, secured by your home, and it is repaid with interest. On $141,070 at 6.00% p.a. over 30 years that is about $846 a month. If the funds buy an investment property, the interest is generally tax deductible and partly offset by rent. If they fund a holiday or a car, the interest is simply a cost.
What is the difference between equity and usable equity?
Equity is the total value you own outright: property value minus the loan. Usable equity is the portion a lender will let you access, calculated at 80% of value minus the loan, to avoid LMI. A $900,000 home with a $520,000 loan has $380,000 equity but $200,000 usable equity. Our LVR and LMI guide explains the 80% threshold.
Can I use equity to consolidate debt?
Yes, and it is one of the most common uses. Rolling a car loan and credit cards into an equity split at a home-loan rate can cut interest sharply, provided you shorten the repayment term rather than stretching the debt over 30 years. Test the numbers on the debt consolidation calculator.
Talk to GNT Finance
GNT Finance can arrange upfront valuations, find the lender that values your home most fairly and structure the equity release properly. Gorakh Timilsina works with investors across Melbourne's north and beyond, at no cost to you in most cases. Book a free consultation or call 0426 403 703.
Written by Gorakh Timilsina
Founder, CEO & Senior Mortgage Consultant at GNT Finance. Gorakh started as a broker assistant, spent years as a senior credit officer assessing loan applications, and now helps Melbourne families get the right loan approved. English, Nepali and Hindi spoken.