What is meant by the term "equity"?
Equity is the value of an asset — a house, a car, a portfolio — minus any debt secured against it. For a property, that means the current market value of the property less the balance of any loans attached to it. It is the share you genuinely own, as distinct from the share the lender has a claim over.
A simple worked example makes it concrete. Say a property is currently worth $1,000,000, and the loan balance against it is $600,000. The equity is the difference:
$1,000,000 − $600,000 = $400,000.
So $400,000 of that property is equity — your position in the asset, sitting above the debt.
Why equity matters more than the headline number
Equity is not just an accounting figure; it is borrowing power waiting to be structured. Lenders will often let you access a portion of your equity to fund a deposit on the next purchase, consolidate other debt, or release cash for renovation or investment — without selling the asset you already hold. That is how a single property frequently becomes the foundation for a second.
Two forces move your equity over time, and they move independently. The first is the market value of the property, which can rise or fall with the broader market. The second is the loan balance, which falls as you pay down principal. You control one of those directly; the other you do not. A clear view of both is what tells you how much usable equity you actually have at any given moment.
Usable equity is a policy question, not a fixed amount
The total equity in a property and the equity a lender will let you draw on are two different numbers. Most lenders will not let you borrow against the full amount. As a general guide, they calculate usable equity to roughly 80% of the property's value, then subtract the existing loan balance — anything above that 80% band typically attracts lenders mortgage insurance, which changes the maths.
Using the example above: 80% of $1,000,000 is $800,000, less the $600,000 loan leaves around $200,000 of usable equity, indicatively, rather than the full $400,000 on paper. But the precise figure depends on the lender's policy, a current valuation of the property, and your serviceability — your capacity to comfortably meet the repayments on any new borrowing. Different lenders read all three differently, so the same equity position can unlock different amounts depending on where the loan is placed and how it is structured.
That is where the work sits: knowing not just what your equity is worth, but which lender's policy turns the most of it into something you can actually use, and how to structure the release so it serves the next move rather than complicating it.
Book a strategy session and we will map what your equity can genuinely do.
General information only — not personal financial product or credit advice. Lending is subject to each lender's policy, your full circumstances and responsible-lending assessment. AeFin is an Australian Credit Representative (CR 464548) of Finsure (ACL 384704).