Equity is one of the most important numbers in property, yet many owners are not sure exactly how much they have or what it means. In this guide we explain property equity in plain English, show you how to calculate it and look at how it can change over time.
Property equity is the part of your property that you own outright. It is the difference between what your property is worth today and how much you still owe on the loan secured against it.
Equity = Current property value − Outstanding loan balance
For example, if your home is worth $800,000 and you owe $500,000 on your mortgage, you have $300,000 in equity.
Lenders usually will not let you borrow against all of your equity. Many calculate usable equity as up to 80% of the property value, minus what you owe. Using the example above: 80% of $800,000 is $640,000, less the $500,000 loan, gives around $140,000 in usable equity. Each lender has its own policies, so the real figure can vary.
Equity is not guaranteed to go up. If property values fall, or if you borrow more against the property, your equity shrinks. That is why it is worth checking your position regularly rather than relying on an old valuation.
Some owners use equity to help fund renovations, a deposit for an investment property or other large expenses. Using equity means taking on more debt, so it is important to understand repayments, risks and your overall position, and to speak with a licensed lender or adviser before deciding.
The Property Folio AI Equity Tracker shows how your equity changes over time across every property you own, while the Portfolio Dashboard brings values and loan balances together in one view. Our AI Assistant can also explain your numbers in plain English.
Equity is simply value minus debt, but knowing your true and usable equity gives you a clearer picture of your financial position and options. Keep your values and loan balances up to date, review your equity regularly and get professional advice before you borrow against it.
Property equity is the difference between your property’s current market value and the amount you still owe on the loan secured against it.
Subtract your outstanding loan balance from your property’s current value. For example, a $800,000 property with a $500,000 loan has $300,000 in equity.
Usable equity is the portion lenders may let you borrow against. It is often calculated as up to 80% of the property value minus your loan balance, but lender policies vary.
Yes. If property values fall or you increase the debt on your property, your equity will decrease.
Property Folio AI tracks your property values and loan balances in one place, shows how your equity changes over time and explains it in plain English. It does not provide financial advice.
