How to calculate your home equity

Accessing your home equity can help free up funds for big-budget plans, like kicking off renovations, investing in property or consolidating higher-interest debt.

Knowing how much equity you’re sitting on can also give you a clearer picture of your financial situation.

We’ll show you how you can work out how much equity you have, as well as share some important tips about borrowing against your equity with a home equity loan.

Get to know the home equity basics

Figuring out how much home equity you have involves subtracting the balance of your home loan from your property’s value.

For example: If your home is valued at $750,000 and you have $600,000 owing on your loan, you’d have $150,000 in home equity.

While this is pretty straightforward, working out the value of your home and how you can use your home equity requires a few more considerations.

Factor in the real value of your property

Your home equity is based on an up-to-date assessment of your home’s market value. Even if you have a valuation from a year or two ago, it may have changed significantly. Home equity generally grows over time due to property market growth, your ongoing loan repayments, or both. So you may have more equity under your belt than you realise.

If you want a quick – but not necessarily accurate – estimate of your home’s value, check the recent selling prices of similar properties in your area. If you’re after a more accurate estimate, consider getting a valuation from a professional property valuer.

Understand accessible equity

If you’re looking to borrow against your home equity, note that lenders set limits on how much home equity you can access. This is why it’s important to consider your servicing capability when looking to borrow more against your equity.

For example: Let’s say a bank agrees to let you borrow up to 90% of your property’s value. If your home is worth $500,000, and you have $100,000 in equity, you can borrow up to $50,000 against your home equity.

This is what home lenders call your “accessible equity”.

Take loan-related fees into account

When borrowing against your equity, you should also consider any fees included with a new loan, such as application and valuation fees.

Using equity to borrow over 80% of your property’s value may also mean you’ll have to pay Lenders Mortgage Insurance (LMI). This one-off cost is added to your loan to help protect your lender if you can’t make repayments.

Before making any decisions about a home equity loan, be sure you understand all the costs.

Calculate your borrowing power with a little help

If you’re unsure whether borrowing against your equity is the right move, consider comparing your current repayments with repayments factoring in an equity loan.

Thankfully, crunching the numbers on your home loan doesn’t require you to brush up on your maths. Suncorp Bank’s home loan calculators can help you work out how much you could borrow and what your repayments might be across different borrowing scenarios and timeframes.

Learn about your equity options

Taking advantage of your equity can open a lot of doors, but keeping your circumstances in mind is important. If you’re considering an equity loan, consider getting financial guidance from your accountant or financial planner.

Our home lending specialists can help you understand your options and all consultations are 100% obligation-free.

Talk to a home lending specialist

Read more:

• How to use equity to buy a second home
• Financing a renovation: what are your options
• How much equity do I need to refinance a mortgage

Information is intended to be of a general nature only and any advice has been prepared without taking into account any person's particular objectives, financial situation or needs.

Home Loans are provided by Suncorp-Metway Ltd ABN 66 010 831 722 AFSL No. 229882 Australian Credit Licence 229882 (“Suncorp Bank”) to approved applicants only. Fees, charges, terms and conditions apply and are available on request. You should make your own enquiries, consider whether advice is appropriate for you and read the relevant Product Disclosure Statement or Product Information Document before making any decisions about whether to acquire a product.