Building equity in your home isn’t just about waiting for the property market to rise—it’s about making smart financial moves that give you more usable equity, faster. By understanding lender limits, loan features like offset accounts, and the risks of borrowing against your property, you can actively accelerate your equity growth. This expert-written guide explores practical strategies and insider tips that go beyond the basics, so you can put your home to work sooner.
Let’s dive in
Table of Contents
What Is Home Equity?
Home equity is calculated as the total value of your home minus your home loan. The equity in your home increases as you continue to pay down your loan. And if your property’s value increases, your equity also increases.
Home equity is more than just paying off your mortgage. It is an asset that you can borrow against and use for things like paying off other debt or paying your kids’ college education. Home equity loans are usually lower than credit or personal loans because the equity secures the loan.
If you are borrowing to make improvements on your home, home equity loans can also be tax deductible.
Home Equity Calculator
Curious about how much home equity you have? Try this home equity calculator to see how much equity you have in your home.
7 Ways of Creating Home Equity Faster
1. Get Another Bank Valuation
This is one of the simplest and most overlooked ways to create equity in your home.
As mentioned above, home equity is calculated as your property’s value minus any loan balance. For example, if a bank values your home at $800,000 and you owe $450,000, your total equity is $350,000.
Bank Valuation vs Market Valuation
A bank valuation is different from a market valuation. A bank valuation helps the lender assess their risk on the property. In contrast, a market valuation, which a real estate agent can provide, determines the property’s potential sale price.
You can consult a mortgage broker for assistance with arranging a bank valuation
Using Multiple Bank Valuations To Unlock More Equity
If you plan to borrow against your home equity, a bank valuation is essential. The good news: different banks often use different valuers, which can lead to surprisingly different results.
Date | Valuer | Amount | Difference |
12/09/2025 | Bank Valuation 1 | $900,000 | – |
13/09/2025 | Bank Valuation 2 | $920,000 | $20,000 |
14/09/2025 | Bank Valuation 3 | $1,000,000 | $100,000 |
As this scenario shows, three different banks valuing the same property at the same time produced vastly different results. Bank Valuation 3 was $100,000 higher than the first valuation.
This demonstrates how simply using a different bank valuer could potentially unlock an additional $100,000 in usable equity.
We can assist with arranging a free bank valuation. Get in touch to explore your options and maximise your home equity today.
Read More: How to challenge a bank valuation
2. Put Down A Bigger Deposit To Build Equity Immediately
Although not always possible, you can start building equity immediately by putting down a larger deposit when buying a home.
Why a Larger Deposit Matters
- A larger deposit means you borrow less, which reduces your loan-to-value ratio (LVR).
- Lower LVR often allows you to avoid lenders mortgage insurance (LMI), saving thousands in upfront costs.
- More of your money is immediately invested in your property, which gives you a head start on adding equity to home.
Practical Tips for Increasing Your Deposit
- Save consistently: Set aside a fixed portion of your income each month.
- Use bonuses or tax refunds: Extra funds can boost your deposit quickly.
- Seek family assistance or first-home buyer grants: In Australia, these can supplement your savings and help you reach a 20% deposit faster.
The Benefit Of Building Equity Early
Starting with a larger deposit doesn’t just reduce upfront costs—it also sets the foundation for fast equity growth. The more equity you have from the beginning, the more options you have for renovations, investments, or borrowing against your home in the future.
By planning carefully and saving strategically, you can increase equity in home from day one and make the most of your property investment.
Read More: On the opposite side, how to buy with no deposit at all?
3. Get A Shorter Loan Term
This is one of the simplest ways to create forced savings and build equity more quickly. By default, most banks give you a 30-year mortgage term. Your repayments are then calculated to stretch over three decades.
But if you shorten your loan term to 25, 20, or even 15 years, you’ll pay down the loan much faster. The benefit? You’ll build equity sooner while saving a huge amount in interest.
Equity Example: $800,000 Property (Loan $640,000, 20% deposit, 5.4% interest rate)
Loan Term | Monthly Repayment | Interest Paid (Life of Loan) | Interest Saving |
30 years | $3,593 | $653,767 | – |
25 years | $3,892 | $527,609 | $126,158 |
20 years | $4,366 | $407,938 | $245,829 |
15 years | $5,195 | $295,178 | $358,589 |
Key Takeaway
The shorter the loan term, the faster you reduce your debt and the quicker you build more equity into your home. While repayments are higher, the long-term savings are significant.
4. Fix Up Your Property To Create Equity
Some simple cosmetic renovations can greatly impact your home’s equity position. But not all renovations improve your equity position, and spending money doesn’t necessarily increase value.
Jobs that tend to have a negative impact on a property’s value include poor landscaping, additions that don’t match the original building, creating dark rooms, over-renovating, appealing to the wrong crowd and not getting the appropriate council approvals.
Read More: See ways to access home equity to renovate.
5. Pay More On Your Repayments
If you don’t want to shorten your loan term, you can still build equity faster by making extra repayments. Even small additional payments can significantly reduce your interest bill and help you pay off your loan years earlier.
Example: $850,000 Property (Loan $680,000, 20% deposit, 5.4% interest rate)
Loan Amount | Loan Term | Monthly Repayment | Extra Payment | Interest Saved | Time Saved |
$680,000 | 30 years | $3,816 | – | – | – |
$680,000 | 30 years | $3,816 | $100 | $45,743 | 2 years 4 months |
$680,000 | 30 years | $3,816 | $200 | $86,984 | 4 years 5 months |
$680,000 | 30 years | $3,816 | $500 | $171,587 | 9 years |
$680,000 | 30 years | $3,816 | $1,000 | $256,569 | 13 years 8 months |
As you can see, paying just a little extra each month has a massive impact. By adding $1,000 to your repayments, you could save over $250,000 in interest and cut more than 13 years off your loan term.
Practical Tips To Make Extra Repayments Work
- Round up your repayments – If your monthly repayment is $3,816, round it up to $3,900. Small amounts add up over time.
- Switch to fortnightly payments – Pay $1,908 every fortnight instead of $3,816 monthly. Because there are 26 fortnights in a year, you’ll make the equivalent of one extra month’s repayment annually.
- Automate your repayments – Set up a direct debit so extra repayments go straight into your loan account after payday. This removes the temptation to spend the money elsewhere.
Read More: ASIC Extra Mortgage Payment Calculator
6. Use Bonuses And Tax Refunds
If you don’t want to put yourself under too big a financial commitment like reducing your loan to a 20, or 25-year term or increasing your monthly repayment, look for lump sums of money you receive each year – like bonuses and tax refunds.
You can even use Christmas and birthday gifts (if you have some rich relatives.) if your gifts are non-monetary, you can stick them on eBay and put the cash into your home loan!
Any extra money added to the loan goes to reducing your loan principle and therefore reduces your interest bill!
7. Use One Partner’s Income To Build Equity
This is one my parents did back in the day, and it still works a treat today. Couples that want to get their home loan paid off super fast can dedicate one person’s income entirely to paying down the home loan and live off the second income. You might need to cut back on the smashed avo and late-night pizza, but it will help build that home equity way faster!
Loan Features That Help Build Equity Faster
Certain home loan features can help you grow your equity more quickly. Using them strategically maximises your property’s value.
Offset Accounts
An offset account is a savings account linked to your home loan. Your savings reduce the interest charged on your loan. Less interest means more of your repayments go toward the principal. This helps you add equity to home faster.
How it works for beginners:
- Every dollar in your offset account reduces interest on your loan.
- Lower interest allows your principal to reduce faster.
- Example: $20,000 in offset = no interest on that money, which instantly boosts equity.
Redraw Facilities
A redraw facility lets you access extra repayments you’ve made to your home loan.
How it helps build equity fast:
- Extra repayments reduce your loan balance quicker than minimum payments.
- Lower balance = less interest over time → faster equity growth.
- You can withdraw funds if needed, but leaving money in the loan keeps growing your equity.
Quick Comparison: Equity-Building Features
Feature | How It Helps Build Equity | Key Considerations |
Offset Account | Reduces interest, pays down principal faster | Savings must stay in account for best results |
Redraw Facility | Extra repayments reduce loan balance | Frequent withdrawals slow growth |
Using these features wisely can help you increase equity in your home faster. Combining consistent repayments, smart planning, and professional advice maximises your long-term equity growth.
How Much Of Your Home Equity Can You Actually Use?
Many homeowners are surprised to learn they cannot access all their equity at once. Lenders only allow you to use a portion. Understanding the difference between total equity and usable equity is key.
Total Equity vs Usable Equity
- Total equity is the difference between your property’s current value and the balance of your home loan.
- Usable equity is the part you can actually borrow against. This amount depends on lending limits and your financial situation.
LVR and Lender Rules
Most lenders let you borrow up to 80% of your property value without paying Lenders Mortgage Insurance (LMI). If you borrow more than 80%, you will likely need LMI. This extra cost reduces your usable equity. Each lender has its own policy, so the limit may vary.
Other Factors That Matter
Access to equity is not just about your property value. Lenders also assess:
- Your income and ability to make repayments
- Your credit score and repayment history
- Your overall financial commitments
These factors affect how much equity you can unlock.
Example: Equity in Action
Imagine your home is worth $800,000 and your loan is $400,000.
- Total equity = $800,000 – $400,000 = $400,000
- At an 80% LVR, the maximum you could borrow is $640,000
- Subtract the loan balance of $400,000 → usable equity = $240,000
This example shows a clear process for calculating home equity in practice.
Bonus: How To Use The Equity In Your Home
Home equity is more than just a number on paper. When used wisely, it can open doors to exciting opportunities. However, it’s important to understand the risks and make sure each decision supports your long-term financial goals.
1. Upgrade To Your Forever Home
It’s rare for your first home to be your forever home. By building equity, you create the chance to upgrade. You can sell your current property and use the proceeds, including your equity, to purchase a larger home in a better location.
2. Renovate and Add Value
Using your equity to renovate can be a smart move. Renovations not only improve your lifestyle but can also boost your property’s value. A well-planned renovation adds comfort today and helps you increase equity in home for tomorrow.
3. Buy a Car or Boat
Some homeowners use equity to purchase a car or even a boat. This can make sense because home loan rates are often lower than personal loan rates. However, you should only take this step if it aligns with your budget and lifestyle.
4. Cover Major Life Expenses
Equity can also fund important milestones such as weddings, education, or even investments in the share market. Accessing equity this way gives you flexibility, but it’s wise to balance short-term needs with long-term goals.
5. Build More Equity Before Using It
The best use of equity is often to build more. By making extra repayments, shortening your loan term, or using an offset account, you can grow your equity faster. With more equity, you’ll have greater options and stronger financial security when opportunities arise.
Expert Tip: Always seek advice from a mortgage broker before unlocking your equity. A clear strategy today can save you from financial stress tomorrow.
Risks And Costs Of Accessing Home Equity
Accessing your home equity can be tempting, but it carries both risks and costs. Understanding these factors helps you make smarter decisions.
Key Risks to Consider
Borrowing against your equity increases your financial exposure. Common risks include:
- Higher debt levels: More debt means larger repayments each month.
- Interest rate rises: Variable rates can increase costs quickly.
- Property market downturn: Falling property values reduce your usable equity.
- Over-leveraging: Drawing too much equity may limit your future borrowing options.
Typical Costs of Accessing Equity
Accessing equity isn’t free. You may face:
- Valuation fees: Lenders charge to assess your property’s current value.
- Application fees: Some lenders require processing fees.
- Lenders Mortgage Insurance (LMI): Needed if borrowing above 80% LVR.
- Break costs on fixed loans: Early repayment of existing loans can trigger fees.
Practical Tips For Using Equity Wisely
Before accessing your equity, plan carefully:
- Review your repayment capacity to ensure you can manage higher debt.
- Consider your future plans—don’t borrow money you can’t comfortably repay.
- Seek professional advice to make informed decisions.
If you aim to build more equity into your home before selling, use borrowed funds wisely, like for renovations or debt consolidation. Thoughtful planning can also help you create equity fast while minimising risk.
Building Home Equity FAQs
What is usable equity in a home?
Usable equity in a home is the portion of your total equity a lender will let you access. Typically, this is up to 80% of your property’s value minus your current loan balance in Australia.
Can I use equity if I have a fixed-rate home loan?
Yes, you can use equity if you have a fixed-rate home loan, but there may be limits on extra repayments. Check your lender’s terms to avoid break costs.
What fees apply when unlocking equity?
The fees that apply when unlocking equity can include valuation fees, application or settlement fees, and lenders mortgage insurance if borrowing above 80% of the property value.
What are the risks of using home equity?
The risks of using home equity include higher repayments, exposure to interest rate rises, and the possibility that your property value drops, which reduces the equity you can access.
Can I use home equity to consolidate debt?
Yes, you can use home equity to consolidate debt. Many Australians do, but ensure the new loan term doesn’t increase your total interest costs.
Is using an offset account the same as building equity?
No, using an offset account is not the same as building equity. An offset account reduces interest on your loan, helping you pay it off faster, which builds equity more quickly over time.
Is a home equity loan a second mortgage?
Yes, a home equity loan is essentially a second mortgage. It uses your property as security while keeping your first home loan separate.
Is there a penalty for paying off a home equity loan early?
Yes, there can be a penalty for paying off a home equity loan early. Some lenders charge early repayment fees or break costs.
What is the home equity scheme in Australia?
The home equity scheme in Australia lets eligible homeowners access part of their property’s value without selling. It is designed to provide funds for retirement, renovations, or financial flexibility.
Next Steps To Get Started With Your Home Equity
Our team at Hunter Galloway is here to help you access home equity. Nathan & Joshua Vecchio are Senior Mortgage brokers who specialise in making your home journey easy.
Unlike other mortgage brokers who are just one-person operations, we have an entire team of experts to help make your home loan journey as simple as possible.
If you want to get started, please call us at 1300 088 065 or book a free assessment online to see how we can help.
Start again
