Home equity loans: how much can you borrow?

Total equity is your property's value minus the debt secured against it. A home worth $800,000 with a $400,000 mortgage has $400,000 in total equity. Paying down the loan can increase it. Property values can rise or fall.

Lenders often use 80% of the property's accepted value, less your current mortgage, as a starting point for usable equity. Borrowing above 80% may be possible, but lender limits, purpose restrictions and lenders mortgage insurance can apply.

You don't need to borrow the maximum. If you borrow $100,000 in this example, your total mortgage debt becomes $500,000. Your total equity falls to $300,000, assuming the value stays at $800,000 and fees are paid separately.

Try the home equity calculator with your own figures. If the estimate is too low, our building home equity guide explains the options before taking on more debt.

We can assess these uses for your equity. The lender still checks the purpose, property and repayments.

Moving to your next home? The timing of the sale matters as much as the equity figure. Our buying and selling guide covers planning the move. If you're keeping both properties, check whether the lender wants them tied together as security; our cross-collateralisation guide explains the trade-offs.

Your current lender may let you increase the mortgage or set up a separate loan account for the extra borrowing. A separate split can make the purpose, repayments and payoff date easier to track.

Interest generally applies to the amount drawn. A lump sum paid out to you has been drawn, even if you haven't spent it. An eligible linked offset account may reduce interest, subject to the product's terms. Ask when funds will be released and whether they're paid to you, a builder or an existing creditor.

Refinancing replaces your existing mortgage and can include approved additional borrowing. Compare the cost across the whole loan, including discharge, application, valuation and any fixed-rate break fees. Keep the remaining term in view; restarting at 30 years can increase total interest.

Our refinancing guide covers the comparison. A different lender may use a different valuation, but a higher result or approval isn't guaranteed.

Some lenders offer a revolving limit secured against your property. You draw funds as needed and pay interest on the outstanding balance. Compare its rate, fees and repayment rules with an ordinary loan split. Without a plan to reduce the balance, flexible access can leave the debt hanging around.

For a hypothetical $100,000 extra loan at 6% a year, principal and interest repayments are about $716 a month over 20 years, or $600 over 30 years. Total interest is roughly $72,000 versus $116,000. These are rounded illustrations, not current lender quotes; they assume monthly repayments, no fees and an unchanged rate.

The longer term lowers the monthly bill by about $117 but adds roughly $44,000 in interest. Use our borrowing capacity calculator for an initial estimate, then ask us to compare repayments for the amount, rate and term you are considering.

If you're already struggling with repayments, speak to your lender's hardship team before assuming more borrowing will help. Moneysmart's debt consolidation guide covers alternatives and free financial counselling.

It depends on how the borrowed money is used. Borrowing for an income-producing investment may qualify; borrowing for your own kitchen, car or holiday generally doesn't. The property used as security doesn't decide the deduction.

Mixing private and investment spending in one loan can require interest to be apportioned. A separate split helps recordkeeping, but doesn't create a deduction. Have your accountant check the structure before you draw or move funds. This is general information, not tax advice. If you're thinking about borrowing to invest, our debt recycling guide explains how separate loan splits work. The ATO's rental interest guidance explains the distinction.

Have ID, recent income evidence, home loan and other debt statements, and details of household spending ready. Your employment and income type affects the documents required.

An online property estimate isn't the bank's valuation. If the result looks wrong, our bank valuation guide explains the evidence that may support a review. Don't commit to spending while approval or funding remains uncertain.