Home loan guide
There’s more to it than you think
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
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.
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.
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
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
Although not always possible, you can start building equity immediately by putting down a larger deposit when buying a home.
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?
Check to see if you are eligible for a home loan
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.
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 |
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.
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.
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.
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.
Read More: ASIC Extra Mortgage Payment Calculator
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!
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!
Certain home loan features can help you grow your equity more quickly. Using them strategically maximises your property’s value.
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:
A redraw facility lets you access extra repayments you’ve made to your home loan.
How it helps build equity fast:
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.
Would you like to learn about your situation?
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.
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.
Access to equity is not just about your property value. Lenders also assess:
These factors affect how much equity you can unlock.
Imagine your home is worth $800,000 and your loan is $400,000.
This example shows a clear process for calculating home equity in practice.
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.
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.
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.
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.
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.
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.
Accessing your home equity can be tempting, but it carries both risks and costs. Understanding these factors helps you make smarter decisions.
Borrowing against your equity increases your financial exposure. Common risks include:
Accessing equity isn’t free. You may face:
Before accessing your equity, plan carefully:
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.
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.
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.
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.
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.
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.
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.
Yes, a home equity loan is essentially a second mortgage. It uses your property as security while keeping your first home loan separate.
Yes, there can be a penalty for paying off a home equity loan early. Some lenders charge early repayment fees or break costs.
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.
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.
