You might’ve heard the term “usable equity” and wondered what it actually means. Let’s break it down.
Simply put, usable equity is how much of the equity in your property you can tap into or “use.”
How do you figure it out? And what can you use it for?
To calculate usable equity, you need to know three things:
- The current market value of your property
- The maximum Loan to Value Ratio (LVR) allowed for that property
- The current debt secured against the property
Then:
Usable Equity = (Market Value × Max LVR) – Current Debt
For example:
If your property is worth $1 million, and the max LVR is 80%, and you owe $450,000, your usable equity would be:
$1,000,000 × 80% – $450,000 = $350,000 usable equity
That max LVR is a big deal — it sets the limit on how much you can borrow. For owner-occupied homes, it’s usually 80%. For investment properties, it’s lower, around 65% right now.
When you access usable equity, you’re basically asking the bank to lend you more against your existing home. You can then use this money as a deposit or equity for something else—often an investment property.
Using the example above, you could use that $350,000 as the 35% deposit for an investment property, borrow the remaining 65% ($650,000) from the bank, and effectively finance 100% of the new property purchase—spread across two properties.
Of course, the bank will check your affordability before approving anything new.
Usable equity isn’t just for property investment. You might use it for other things like buying a car, investing in shares, or paying off unsecured debts.
If you have good equity in your home, putting it to work might benefit you more in the long run. So, why not find out how much usable equity you have?
