As you pay down your mortgage and your property grows in value, you build equity. That equity can be a powerful tool—if used thoughtfully.
What is equity?
Equity is the difference between your property’s market value and your outstanding loan balance. For example, if your home is worth $900,000 and you owe $500,000, your equity is $400,000.
Popular ways to use equity
- Renovations: Improve livability and value—think kitchens, bathrooms, energy upgrades.
- Investment property: Use equity as a deposit to expand your portfolio.
- Debt consolidation: Roll higher-interest debts into a home loan to reduce interest (only if spending habits are under control).
- Education or business: Fund growth or opportunities with clear ROI.
How to access equity
- Top-up or refinance: Increase your loan limit or move to a sharper product.
- Use an offset account: Keep funds flexible while reducing interest.
- Consider a split: Separate purposes (e.g., home vs. investment) for clearer tracking.
Key safeguards
- Avoid overstretching: Maintain buffers for rate changes or emergencies.
- Know the costs: Valuations, fees, potential LMI, and tax implications.
- Have a clear plan: Define your objective and exit strategy for borrowed funds.