If you own a home or investment property, you may have built up equity over time.
That equity may be able to help you fund another property purchase, renovate, consolidate debt, invest, assist family, or improve cash flow. But having equity in a property does not automatically mean you can access all of it.
Lenders will still assess your property value, current loan balance, income, expenses, existing debts, loan purpose and ability to repay the additional borrowing.
That is why equity release should not be treated as “free money”. It is a lending strategy that needs to be structured properly.
At Evolve Lending & Finance, we help homeowners and investors understand how much equity may be available, which lenders may suit their situation, and how to structure the loan for their goals.
What Is Equity?
Equity is the difference between the value of your property and the amount you owe against it.
For example, if your home is worth $800,000 and your home loan balance is $450,000, your equity is:
$800,000 – $450,000 = $350,000
In simple terms, you have $350,000 in equity.
However, this does not mean a lender will allow you to borrow the full $350,000. The amount you may be able to access depends on lender policy, loan-to-value ratio limits, your borrowing capacity and the purpose of the funds.
What Is Equity Release?
Equity release means accessing part of the value you have built up in your property.
There are generally three ways this can happen.
1. Selling the Property
You can sell the property, repay the loan secured against it, pay any selling costs and keep the remaining funds.
This may allow you to realise most of your equity, but it also means giving up ownership of the property.
2. Borrowing Against the Property
This is what most people mean when they talk about releasing equity.
You keep the property and apply to borrow additional funds against it. This may be done through your existing lender or by refinancing to a new lender.
The lender will assess the property value, current debt, loan purpose and your ability to repay the larger loan.
3. Reverse Mortgage
A reverse mortgage is a specialist form of equity release, generally used by older homeowners or retirees.
Instead of making regular repayments, interest is usually added to the loan balance and repaid later, often when the property is sold, the borrower moves into aged care, or the borrower passes away.
Reverse mortgages are not suitable for everyone and should be considered carefully with appropriate advice.
How Much Equity Can You Access?
The amount of equity you can access is not the same as your total equity.
Many lenders commonly limit standard borrowing to around 80% of the property value before lenders mortgage insurance or additional restrictions may apply.
Using the earlier example:
| Item | Amount |
|---|---|
| Estimated property value | $800,000 |
| 80% of property value | $640,000 |
| Current loan balance | $450,000 |
| Potential accessible equity | $190,000 |
In this example, the owner has $350,000 in total equity, but may only be able to access around $190,000 through a standard loan structure, subject to lender approval and serviceability.
Can You Access Equity Across Multiple Properties?
Yes, in some cases.
If you own more than one property, a lender may assess available equity across multiple securities.
For example:
| Property | Value | Loan Owing |
|---|---|---|
| Home | $800,000 | $450,000 |
| Investment property | $600,000 | $250,000 |
| Total | $1,400,000 | $700,000 |
If a lender allowed borrowing up to 80% of the combined value, the total loan limit may be:
80% of $1.4 million = $1.12 million
Less existing debt of $700,000, potential accessible equity may be around $420,000, subject to lender policy, valuation and serviceability.
However, using multiple properties as security needs careful thought. Cross-securing properties can reduce flexibility later, so the structure matters.
Why Do People Release Equity?
Property owners release equity for many different reasons.
Common reasons include:
- using equity as a deposit for an investment property
- funding renovations or home improvements
- consolidating credit cards, personal loans or other debts
- buying a car, caravan, boat or major asset
- investing in shares, managed funds or other assets
- helping adult children with a property purchase
- funding business or cash flow needs
- supporting retirement income
- paying for aged care or home modifications
The right structure will depend on the purpose of the funds, the loan amount, the property being used as security and your broader financial position.
Equity Release to Buy an Investment Property
One of the most common uses of equity release is to help buy another property.
Rather than saving a full cash deposit, some homeowners use equity from their existing property to fund the deposit and costs for an investment purchase.
This can be effective, but the loan structure is important.
Key considerations include:
- whether the equity loan should be split from your home loan
- whether the purpose of the borrowed funds is clearly documented
- whether the loan may have tax implications
- whether the investment property loan should be with the same lender or a different lender
- whether the structure preserves future refinance flexibility
- whether repayments remain manageable if rates or expenses increase
This is where professional lending advice can make a material difference.
Equity Release for Renovations
Equity can also be used to fund renovations or property improvements.
For smaller renovations, lenders may allow funds to be released upfront, depending on the amount and purpose.
For larger or structural renovations, lenders may require more detail, such as:
- builder quotes
- invoices
- council approvals
- building contracts
- progress payment schedules
- valuation based on completed works
The lender may also want to control the release of funds, especially where the renovation is substantial.
Equity Release for Debt Consolidation
Some borrowers release equity to consolidate higher-interest debts, such as credit cards, personal loans or car loans.
This can reduce monthly repayment pressure, but it needs to be handled carefully.
Rolling short-term debt into a longer-term home loan may lower repayments now, but it can increase the total interest paid over time if the debt is not repaid faster.
Debt consolidation should usually be paired with a clear repayment plan. Otherwise, it can simply move the problem rather than solve it.
What Is Cash Out?
Cash out is when additional loan funds are released to you rather than being paid directly to a supplier, creditor or property purchase.
Examples may include:
- money transferred to your bank account
- funds released for future investment
- funds for renovations before invoices are available
- funds for personal use
- funds for business or working capital purposes
Lenders treat cash out differently.
Some lenders are comfortable with larger cash-out amounts. Others may cap cash out or require detailed evidence of what the funds will be used for.
This is one of the reasons lender selection is important. The right lender for one equity release scenario may not be the right lender for another.
How Does the Equity Release Process Work?
A typical equity release through a home loan or investment loan usually involves:
- reviewing your current property value, loan balance and loan structure
- estimating accessible equity based on lender loan-to-value ratio limits
- checking borrowing capacity and repayment affordability
- confirming the purpose of the funds
- arranging a lender valuation
- structuring the loan as a top-up, refinance, separate split, line of credit or other facility
- completing approval, documents and settlement
The process may be simple in some cases, but more complex where the borrower is self-employed, owns multiple properties, wants a large cash-out amount, or is using the funds for investment or business purposes.
What Does It Cost to Release Equity?
The costs of releasing equity are generally similar to other home loan or refinance transactions.
Depending on the lender and structure, costs may include:
- valuation fees
- lender application fees
- settlement or documentation fees
- legal fees
- government registration fees
- discharge fees from the existing lender
- lenders mortgage insurance, if applicable
- break costs if leaving a fixed rate loan early
Before proceeding, it is important to weigh the cost of releasing equity against the benefit of what the funds will be used for.
Is Equity Release a Loan Product?
No. Equity release is not the name of a specific loan product.
It is a broad term used to describe accessing equity from a property.
The actual loan may be structured in different ways, including:
- variable rate home loan
- fixed rate home loan
- principal and interest loan
- interest-only loan
- line of credit
- investment loan
- reverse mortgage
Each structure has different implications for repayments, flexibility, interest cost and future borrowing.
Things to Consider Before Releasing Equity
Before releasing equity, it is worth asking:
- What is the money being used for?
- Is borrowing the right way to fund this?
- Can I afford the higher repayments?
- What happens if interest rates increase?
- Should the new borrowing be split from my existing loan?
- Will this affect future borrowing capacity?
- Are there tax or investment implications?
- Is my current lender the right lender for this purpose?
- Would selling an asset, using savings or restructuring debt be a better option?
Equity release can be useful, but it also increases your debt. The goal should be to use equity deliberately, not casually.
How Evolve Lending & Finance Can Help
At Evolve Lending & Finance, we help homeowners and investors understand whether releasing equity is practical, suitable and properly structured.
We can help you:
- estimate how much equity may be accessible
- review your current loan and lender position
- compare lender policies for cash out and equity release
- assess your borrowing capacity
- structure loan splits correctly
- refinance to a more suitable lender where appropriate
- arrange pre-approval for an investment purchase
- understand repayment impact before proceeding
- avoid unsuitable loan structures that may limit future flexibility
As mortgage brokers, we act in your best interests when providing credit assistance. Our role is to help you assess your options and structure the lending in a way that suits your circumstances and objectives.
Thinking About Releasing Equity?
If you are considering using equity from your home or investment property, speak with Evolve Lending & Finance before making a decision.
The right structure can help you access funds for your goals while protecting flexibility for the future.
Speak with a broker today to review your equity release options.
