As an Australian homeowner, you’ve likely built up home equity over time through regular mortgage repayments. This equity can unlock financial opportunities, such as applying for a home equity loan to fund renovations, consolidate debt, or invest.
What Is Home Equity?
Home equity is the difference between your property’s current market value and the total amount you owe on your mortgage and other secured debts. You can access this equity through a loan or line of credit, depending on your lender’s terms.
How Does Home Equity Work?
Let’s break it down with an example. Suppose you bought a home for $300,000 and paid a $60,000 deposit. You took out a $240,000 mortgage. At purchase, your equity was $60,000.
Five years later, you’ve paid off $23,000 of your loan, and your home’s value has increased by $50,000. Your new value is $133,000. That’s the result of both repayments and property appreciation.
How to Calculate Your Home Equity
To calculate your equity:
Home Value – Mortgage Balance – Other Secured Debts = Home Equity
For instance, if your home is worth $500,000 and you owe $300,000 on your mortgage plus $50,000 on a home equity loan, your total equity is $150,000.
Use RateBuster’s to estimate your loan potential based on your equity.
How to Build Home Ownership Value Faster
1. Make Extra Mortgage Payments
Paying more than the minimum reduces your loan balance and builds equity. Even small increases in payment frequency can make a big difference.
2. Stay in Your Home Longer
Holding onto your property for at least five years helps you recover closing costs and benefit from long-term appreciation.
3. Renovate Strategically
Upgrades like kitchen extensions or bathroom additions can boost your home’s value and increase equity.
4. Apply Windfalls to Your Principal
Use bonuses, tax refunds, or other extra income to pay down your mortgage faster.
5. Refinance for Better Terms
Refinancing can lower your interest rate and shorten your loan term, helping you pay off principal more quickly. Learn more in RateBuster’s .
6. Remove Private Mortgage Insurance (PMI)
Once your equity reaches 20%, you can ask your lender to remove PMI or refinance to eliminate it—saving you money each month.
