What is home equity?

Steps to access equity

• 1

  Calculate the available equity

  Work out the amount of equity available in your property using the estimated market value of your home – commonly based on comparable sales within your area or a real estate agent valuation, less the balance of your current loans secured by the property.

• 2

  Work out the “accessible” equity

  Work out how much money is required to achieve your plans. You may or may not want to – or be able to – access the full amount of equity that’s available, and your servicing capability is an important factor in this discussion. That is, your ability to service any additional repayments may have an impact on the amount of equity that you can access. Say, for example, that you have $150,000 worth of equity in your property. However, the amount of additional repayments you can afford based on your income and expenses works out to be $50,000; then realistically that’s the amount you would proceed to unlock, rather than the full $150,000 that’s available.

  Table 1: Working out accessible equity

  80% of Property Value	Remaining loan amount	Home equity available to access*
  $500,000	$100,000	$400,000
  $600,000	$300,000	$300,000
  $750,000	$400,000	$350,000
  $800,000	$425,000	$375,000
  $900,000	$650,000	$250,000
  $1,000,000	$700,000	$300,000
  $1,250,000	$700,000	$550,000

  *Home equity available to access calculated using 80% of total property value – remaining loan amount

• 3

  Review your loan options

  At this point of the process, you may want to start researching and assessing your home loan options with a Mortgage Choice broker. This is also a good opportunity for your broker to do a “health check” on your current home loan, comparing it based on factors such as interest rates, fees and features against other options from your current lender or other lenders in the market.

• 4

  Work out the costs for accessing equity

  The product you choose and the amount of equity you are looking to access may result in various fees and costs. For example, if you choose to access over 80 percent of your property's value, you will likely need to pay Lenders' Mortgage Insurance (LMI). If you decide to switch to another lender, there may be costs such as fees associated with breaking from a fixed rate product, new loan application fee or government fees.

• 5

  Loan application and settlement

  Once you've decided on a loan option with your Mortgage Choice broker, they'll work with you to get the application process underway and support you at every step to settlement.