Upsizing and equity, the Shoalhaven
Using what your place has gained
Your place has gone up. That doesn't mean all of it is usable.
Equity is what your place is worth minus what you owe. Usable equity is the part a lender will let you borrow against, usually up to 80% of the value before lenders mortgage insurance comes into it. That's the number that decides whether you can upsize, renovate or buy an investment.
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Equity gets you the deposit. Your income still has to carry the loan.
Plenty of people have the equity and still can't borrow what they need, because the bigger loan has to pass the same income test as the first one. I check both sides before you list your place or make an offer.
Buy first or sell first is usually the real question.
How usable equity works
$200,000
Worth $750,000, owe $400,000. 80% of $750,000 is $600,000. Take off the $400,000 you owe and about $200,000 is usable.
Illustrative only. The lender's valuation and your income decide the real number.
What I check first
- What a valuer would say it's worth. The lender's valuation, not what the place next door sold for.
- Whether your income carries the bigger loan. Same test as your first loan, on a bigger number.
- Buy first or sell first. Bridging finance, a longer settlement, or selling first and renting for a bit. Each has a cost.
- How it's set up. Separate loan splits for the new place or an investment keep things clean, especially at tax time.
A real local example
How much of my equity can I actually use?
A Sanctuary Point example, with the numbers worked through step by step.
Next home, same broker
When it's time for the next place, message me before you talk to an agent. You'll know your numbers before you list, not after.
Joe has always gone above and beyond to help myself and my husband when it comes to our mortage. He is always on the hunt to better our rates even a year later! Highly competent, honest and reliable. 10/10 Joe. I will be looking forward to having the heaviness yet again taken off my shoulders next time I apply for another home loan. Would recommend!
Karina L, Google review
Thinking about the next place?
Tell me roughly what your place is worth and what you owe. I'll work out what's usable.
Or call or text 0415 138 842. After your shift is fine.
General information only. Figures are illustrative and don't consider your personal situation. Eligibility rules and lender criteria apply.