Equity and debt, a ceiling
Usable equity calculator.
Usable equity is the part of your equity a lender may let you borrow against, up to its cap on the loan-to-value ratio (LVR), the loan as a share of the property's value, before it checks your income. This tool estimates that ceiling from an editable example, and it is not a pre-approval.
Usable equity
$240,000
The most a lender may release at your LVR cap: the cap's share of the value, less what you owe.
Total equity
$430,000
The value less what you owe.
Locked equity
$190,000
Equity the lender keeps as its buffer at this cap; you own it, but it cannot be borrowed against here.
Price ceiling, 20% deposit
$960,000
The highest price your usable equity may cover with a 20% deposit plus purchase costs, before any check of your income.
Price ceiling, 10% deposit
$1,600,000
The same with a 10% deposit; LMI would usually apply and is not included.
With the lender's cap at 80%, a lender may release up to $240,000 on these figures, enough for the deposit and costs on a purchase of about $960,000, if your income supports the loan.
How the number is built
| Property value | $950,000 |
|---|---|
| Most a lender may lend (80%) | $760,000 |
| What you owe | -$520,000 |
| Usable equity | $240,000 |
How it is worked out
- The tool adds up the value of each property you enter, and everything owing against them.
- Total equity is the value less what you owe.
- The lender's limit is the value multiplied by the LVR cap you choose.
- Usable equity is that limit less what you already owe. If you owe more than the limit, it is nil.
- Locked equity is the rest of your equity, the buffer the lender keeps at that cap.
- The first price ceiling divides usable equity by a 20% deposit plus your purchase costs, both as shares of the price. A new loan would cover the rest of the price.
- The second does the same with a 10% deposit, where LMI would usually apply. The premium is not included.
What this tool leaves out
- Serviceability: your income, your expenses, your other debts and the repayments on both loans. A lender's answer depends on it.
- The lender's own valuation, which may come in below the value you enter.
- LMI, on the second price ceiling or on your current loan if you borrow above 80% of its value.
- Each lender's own policy, which can lower the cap or limit how much equity it releases.
- The cost of the extra borrowing, and whether its interest may be deductible, which depends on how the money is used. Ask your accountant.
- Buying in another name, such as a company, trust or SMSF, which may change whether and how this equity can be used.
Questions investors ask
Is usable equity what I can borrow?
No. Usable equity is a ceiling set by your property's value, what you owe and the lender's LVR cap. What a lender will actually lend also depends on serviceability: your income, your expenses, your other debts and the repayments on the new loan. A broker can assess that; this tool does not.
Which LVR cap should I pick?
The cap is the lender's limit, not a setting you choose freely. LMI usually applies above 80%, and lenders set their own caps. Run the tool at more than one cap, then ask your broker which applies to you.
What value should I enter?
A figure a lender's valuer would support, not the best sale in the street or an online estimate. The lender orders its own valuation, and it can come in lower than you expect, so it is worth running the tool at a more conservative value as well.
Why is some of my equity locked?
At your chosen cap, the lender keeps part of the value as a buffer. You still own that equity, but the lender will not lend against it. If the value rises or the loan falls, more of it may become usable.
What do the price ceilings assume?
That usable equity pays the deposit and the purchase costs on the next property, and a new loan covers the rest of the price. With a 10% deposit, LMI would usually apply, and the tool does not count it. Either way, you would need the income to carry both loans.
Can I add equity from two properties?
The tool adds them together for a first look. In practice a lender assesses each property and each loan, and using more than one property as security has trade-offs worth talking through with your broker.
Where to next
If you want to know what your equity could mean for a real purchase, we can work through it with you and bring your broker in on the lending side.
This calculator gives general information only. The result is an estimate built from the figures you enter: a ceiling, not a pre-approval, an offer of credit or a valuation, and it does not assess serviceability or each lender's own valuation and policy. It is not credit, tax or financial advice, and apart from the figures you enter, it does not take into account your objectives, financial situation or needs. CHAD Property coordinates with brokers, accountants and planners and does not give credit, tax or financial advice, so speak with a mortgage broker or lender before you act.
The tools on this page give general information only. Each result is an estimate, worked out from the figures you enter and the assumptions shown, using rates and rules as at the date shown. It is not a quote, and it is not intended to be relied on to make a decision about a financial product, a loan or your tax. It is not personal financial, tax, credit or legal advice, and apart from the figures you enter, it does not take into account your objectives, financial situation or needs. Rates, thresholds and laws change, and some details of recent changes are not yet final. CHAD Property is a buyer's agency. It does not hold an Australian financial services licence or an Australian credit licence, and it is not a registered tax agent. We do not advise on tax, lending, financial products or how to structure ownership, including through a self-managed super fund, a company or a trust; we work alongside the brokers, accountants and financial planners who do. Before you make a financial decision, consider getting advice from a licensed financial adviser, and check any figure here with a licensed or registered professional who knows your situation.