Home Equity Loans

A home equity loan — sometimes called an equity release or line of credit — lets you access the wealth stored in your property without selling it. As property values rise and your loan balance reduces, the gap between what your home is worth and what you owe grows. That gap is your equity, and lenders can allow you to access a portion of it for a range of purposes: investment, renovation, debt consolidation, or other financial goals.

Lagos Financial helps clients structure equity access strategies that work alongside their long-term goals. Related services: refinancing, property investment, and cash-out refinancing.

How Home Equity Is Calculated

Equity is the difference between your property’s current market value and your outstanding loan balance:

Equity = Property Value − Loan Balance

For example: If your home is worth $950,000 and your mortgage balance is $420,000, your total equity is $530,000.

However, lenders don’t allow you to access all of your equity. Most require you to maintain at least 20% of the property value as equity — this is the 80% LVR (loan-to-value ratio) rule. The equity you can actually access is called usable equity.

Usable Equity vs Total Equity

Using the example above ($950,000 property, $420,000 loan):

Maximum loan at 80% LVR: $950,000 × 80% = $760,000
Existing loan balance: $420,000
Usable equity: $760,000 − $420,000 = $340,000

You could access up to $340,000 without triggering Lenders Mortgage Insurance (LMI). Going above 80% LVR is possible with some lenders, but LMI — which can add $10,000–$30,000+ to your costs — applies.

Line of Credit vs Lump Sum

Lump Sum Equity Release (Cash-Out Refinance)

The most straightforward approach: you refinance your existing loan (or top it up) and receive the equity as a cash lump sum added to your loan balance. This method is simple, has lower ongoing fees, and suits borrowers who know exactly how much they need — for instance, a $200,000 investment property deposit.

Line of Credit (LOC)

A revolving credit facility secured by your property, up to an approved limit. You draw down as needed, repay, and redraw. Interest is only charged on the outstanding balance. Lines of credit were popular in the 2000s for investment property strategies but are now offered by fewer lenders due to APRA’s tighter oversight. They tend to carry higher interest rates than standard home loans and require strong financial discipline — the risk of progressively drawing down equity and not reducing the balance is real.

Common Uses for Home Equity

Investment property deposit: Using equity from a principal place of residence to fund the deposit on an investment property without needing cash savings.
Renovation and improvement: Funding a kitchen renovation, extension, or landscaping project that may add value to the property.
Debt consolidation: Rolling high-interest personal loans or credit card debt into your lower-rate home loan. Note: this extends the repayment period and total interest costs unless you make above-minimum repayments.
SMSF contributions or business investment: Some borrowers use equity to build wealth inside superannuation or fund a business — these uses require careful tax and legal advice.

Risks of Accessing Home Equity

Over-leveraging

Increasing your loan balance reduces your financial safety buffer. If property values fall, you may find your LVR above 80% — or in extreme cases, in negative equity. A 10% correction on a $950,000 property would reduce its value to $855,000. If your loan balance is $760,000, your LVR rises to 88.9%.

Serviceability Risk

Accessing equity increases your debt and therefore your repayments. APRA requires all borrowers to demonstrate they can service the new, higher loan at a 3% buffer above the actual rate. Ensure you have genuine capacity to carry the increased debt.

Cross-Collateralisation

Some lenders secure equity loans across multiple properties — using both your home and investment property as security for a combined facility. This is called cross-collateralisation and creates complications when selling one property (the lender controls both), refinancing, or building a property portfolio. Lagos Financial strongly advises keeping securities separate where possible. Structure your equity access so each property stands as security only for its own loan.

Frequently Asked Questions

How long does equity access take to arrange?

A loan top-up with your existing lender typically takes 2–4 weeks if the property value supports it and your income documentation is current. A full cash-out refinance to a new lender takes 4–8 weeks, including a new valuation.

Is the interest on an equity loan tax deductible?

Only if the funds are used for income-producing purposes — for example, purchasing an investment property or shares. Interest on equity used for personal purposes (renovation, holiday, debt consolidation) is not tax deductible. It is critical to document the purpose of each drawdown correctly. Speak to your accountant before proceeding.

Can I access equity if I’m self-employed?

Yes, but lenders apply the same income verification requirements for equity access as for a new loan. Self-employed borrowers typically need 2 years of tax returns and business financials. Some lenders offer low-doc equity access at higher LVR limits.

Does releasing equity affect my credit rating?

An equity release creates a new credit enquiry and increases your total debt. This may affect your credit score modestly in the short term. Regular on-time repayments on the new, higher balance will restore your score over time.

Get Expert Advice from Lagos Financial

With close to 20 years of experience and access to 60+ lenders, Victor Lagos and the Lagos Financial team can help you find the right loan for your situation. Book a free assessment or call us to discuss your options.

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About the Author
Victor Lagos is a licensed mortgage broker (ACL 546774) and founder of Lagos Financial, with close to 20 years of finance industry experience since beginning his career at Bluestone Mortgages in 2006. A member of the Finance Brokers Association of Australia (FBAA) since 2015 and the Australian Financial Complaints Authority (AFCA — 98399), Victor helps Australians build wealth through tailored home loan and property investment strategies, working with 60+ lenders nationwide. Last reviewed: March 2026.

Home Equity Loans | Access Your Property Equity