Total Equity vs Usable Equity
Understanding the crucial difference between what you have and what you can use.
Total equity = Home value − Mortgage
Usable equity = What the bank is willing to lend against your home
Banks usually lend up to:
- 80% on owner-occupied homes
- 70% on investment properties
So even if your home's value has jumped, the usable portion is still capped. Learn more about calculating usable equity.
Example:
House value: $950,000
Mortgage: $480,000
Bank lending max: 80% of $950K = $760,000
Usable equity = $760,000 − $480,000 = $280,000
Remember: Your usable equity might be significantly less than your total equity.
What Lenders Look At (That You Might Not Expect)
Beyond just the numbers, banks consider various factors in their assessment.
- DTI (Debt-to-Income Ratios):Total debt vs your income
- Your other lending:Credit cards, personal loans, car finance
- Your spending patterns:Banks can ask for 3–6 months of statements
- Security type:Some homes (e.g. apartments, leaseholds) are harder to lend against
- Your income type:Self-employed? Commission-based? You'll need extra proof
Check the Reserve Bank's current LVR restrictions to understand current lending limits.
Banks look beyond just your equity position - your overall financial health matters.
Tips to Maximise Your Approval Odds
Practical steps to strengthen your equity position.
- Get a proper property valuation (not just an online estimate)
- Reduce unnecessary debts before applying
- Show stable, reliable income (and keep spending in check)
The more prepared you are, the stronger your equity position becomes. Learn about different ways to access your equity.
Sorted's mortgage guide has helpful calculators to estimate your borrowing power.
A well-prepared application has a much better chance of approval.
The Fine Print Banks Don't Always Explain
Important details that can affect your borrowing power.
- Not all lenders treat equity the same
- Even with strong equity, poor servicing can block approval
- Some lenders offer higher flexibility if your adviser knows how to pitch it
Understanding these nuances can make a big difference. Get in touch to discuss your specific situation.
Working with an experienced adviser can help navigate these complexities.
Want to Know How Much Equity You Can Actually Use?
Let's chat about your specific situation and explore your options.
I'll help you understand what's possible and how to maximize your borrowing power.
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