How much equity can I actually use?
Usable equity is a ceiling, not a guarantee. Three separate limits decide how much a lender will actually release — and the lowest of the three wins.
- The LVR limit. Most lenders release equity up to 80% of the valuation without Lenders Mortgage Insurance (LMI). Some will go to 90% if you pay LMI, which can cost thousands of dollars and is usually added to the loan.
- Your income (serviceability). The bank must check you could still afford all your repayments if rates rose 3 percentage points — APRA’s serviceability buffer. Plenty of owners have $300,000+ of usable equity on paper but can only borrow a fraction of it because their income won’t support the extra debt. Check with the Borrowing Power Calculator.
- The bank’s valuation. Lenders use their own valuer, which often comes in below online estimates and recent sale prices. Run the calculator above with a conservative value as well as your best guess.
Example: $900,000 bank valuation, $400,000 owing| Lending limit | Maximum total loan | Usable equity |
|---|
| 80% LVR (no LMI) | $720,000 | $320,000 |
| 90% LVR (LMI payable) | $810,000 | $410,000 |
| Valuation comes in 5% lower ($855,000), 80% LVR | $684,000 | $284,000 |
The equity recycling strategy
Equity recycling is how many Australian investors build a property portfolio without saving a new deposit for each purchase. The cycle works like this: buy a property → it grows in value → extract the equity that has built up → use it as the deposit on the next property → repeat.
The 80% LVR threshold is the standard lending limit above which Lenders Mortgage Insurance (LMI) is required. By limiting borrowing to 80% of value, you avoid LMI and maintain a position where modest falls in property value won't put you into negative equity. Most professional investors target keeping all properties at or below 80% LVR before extracting equity.
Buying power explained: If your usable equity is $320,000 and you use it as a 20% deposit, you can borrow an additional 80% ($1,280,000) to purchase a property worth $1,600,000 in total — while only contributing $320,000 of your own capital. In practice the ceiling is lower: stamp duty and purchase costs also have to come out of that equity (estimate them with the Stamp Duty Calculator), and the bank must be satisfied you can service all of the debt: the $1.6 million of new borrowing on top of your existing $400,000 loan, or $2 million in total.
Frequently asked questions
What is usable equity?
Usable equity (also called accessible equity or borrowable equity) is the amount of equity in your property you can actually borrow against — typically up to 80% of the property's current value minus your existing mortgage balance. Total equity is the full difference between value and debt, but banks won't lend against the full amount because they maintain a safety buffer (loan-to-value ratio or LVR limit).
How much equity do I have in my home?
Your total equity is the property's current value minus everything you owe on it. A $900,000 property with a $400,000 mortgage has $500,000 of equity, and a loan-to-value ratio (LVR) of 44% ($400,000 ÷ $900,000). Lenders won't let you borrow all of it; what you can borrow against is your usable equity, explained below.
How do I calculate my usable equity?
The formula is: Usable equity = (property value × 80%) − outstanding mortgage balance. For example: a $900,000 property with a $400,000 mortgage has $500,000 in total equity, but only $320,000 in usable equity ($900,000 × 0.80 = $720,000 minus $400,000). This $320,000 can be drawn as an equity loan or line of credit to use as a deposit on the next investment property.
How does usable equity become a deposit for the next property?
Once you release your usable equity, it becomes available cash (via a top-up loan or line of credit). This cash acts as the deposit — typically 20% — on your next investment property. If you have $320,000 in usable equity, you could use it as a 20% deposit on a property worth up to $1.6 million, without needing to save additional funds. This is the equity recycling strategy that many Australian investors use to grow a portfolio.
How much equity can I use to buy another property?
Up to 80% of your property's bank valuation minus what you owe, without paying LMI — for example, $320,000 on a $900,000 home with a $400,000 loan. But you can only borrow it if your income passes the lender's serviceability test (which adds a 3 percentage point buffer to the interest rate), and stamp duty and buying costs come out of the same equity, so the deposit you can actually put down is smaller.
What is cross-collateralisation and should I avoid it?
Cross-collateralisation (or cross-securing) means using Property A as security for the loan on Property B, instead of using released equity as a separate deposit. Most property strategists recommend against it: it gives the bank security over multiple properties simultaneously, making it harder to sell one without the bank's approval, limits your ability to refinance individual properties, and can complicate your portfolio as it grows. The preferred approach is to release equity from Property A as a separate top-up loan, then use those funds as a standalone deposit for Property B.
Can I access equity without selling my property?
Yes — this is the whole point of equity access. You get a new valuation from your lender (or refinance to another lender), release the usable equity as a separate loan split or line of credit, and use those funds as the deposit on the next property. Your original property stays in your name. You pay interest on whatever equity you draw down. The new property's rent covers some of that cost, but any capital growth is not guaranteed, so budget for the repayments from your own income.
Usable equity is calculated at 80% LVR as a guide only. Actual borrowing capacity depends on your income, existing debts, APRA serviceability buffers (currently +3% above the loan rate), and individual lender policies. Confirm your position with your mortgage broker or lender before making decisions. Not financial advice.