Home equity loan calculator
Find out how much equity you have so you can improve your finances and your life.
Unlocking the equity in your home is a great way to get financing for other investments or even just to enjoy your life. Read on to find out how to calculate your equity, or compare line of credit loans in the table below to start putting your equity to work for you.
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How to calculate your equity
Calculating the equity in your home can help you figure out how much you can redraw on your current repayments or how much you can get as a credit increase using your home equity as security. Calculating the equity in your home is pretty easy; you just need to work out the difference between your property value and how much you owe on it.
Equity = Property value - Loan amount still owed
In order to calculate the value of your property, you need to estimate the value of your home by using lists of recent sales in your suburb. This will help you compare the prices of similar properties and get an idea of how much your property could be worth. If you want a more accurate estimate, you can use a professional valuer (which your lender will usually organise).
You will also need to find out your loan balance by contacting your lender or checking your home loan statement.
What are the benefits of knowing how much equity you have?
Equity in property is an asset, and knowing how much you have can help you make sound investment decisions and calculate the amount of extra money you can borrow using your home equity as security. Here are some things you can do using your home equity:
- Finance home renovations. Your home equity can be used to get credit increases on your mortgage without taking out a separate loan. The extra money you get can be used for that home renovation you have been putting off due to lack of finances. You may also use the equity to apply for an additional loan and use the funds to purchase a new car or other investments.
- Accessing your repayments. Making extra payments on your home loan allows you to build extra equity in your loan, and you can later redraw these payments from your lender for some extra funds you can use for a holiday or other urgent need.
- Building wealth. Unlocking the equity in your home can help you improve your lifestyle by enabling you to invest in property. Equity in your home can be used to as security for property investment, enabling you to accumulate wealth.
What to consider when accessing your equity
There are a few factors you should take into consideration before accessing your equity so as to avoid financial difficulties or unexpected expenditure. Here are the three things you need to consider:
- Increase in monthly interest. Accessing your home equity to get an additional loan or credit increase will increase the amount you owe. This will most likely end up increasing the amount you pay in monthly interest.
- Increase in monthly payments. Using your equity can increase your outstanding mortgage amount without increasing your loan repayment term. This will mean that your minimum monthly repayments can rise, so proper budgeting is required so as to avoid financial difficulties.
- Increase in your Loan-to-Valuation Ratio (LVR). If your property value hasn’t increased significantly when you get a redraw or credit increase, your LVR may increase, forcing you to take out Lenders’ Mortgage Insurance (LMI) that will further increase your loan amount.
How to access your equity
Here are three simple ways via which you can access your home equity:
Redraw. The simplest way to build your home equity is to make payments above your minimum monthly repayments. You can then access a portion of this equity by redrawing the extra funds. Redraw restrictions may apply depending on your lender.
Refinancing. If you refinance, you can apply for a credit increase with your bank, which is added to your current loan.
Home equity loan/line of credit loan. A line of credit is a loan which extends you a set credit limit based on your equity. These loans allow you to withdraw small amounts or the whole balance whenever you like, and charges interest only on the amounts withdrawn.
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