13 Best Ways to Use Home Equity in Australia (2025): Renovate, Invest, or Refinance
Homeowners in Australia are using their home equity in 2025 to unlock financial
opportunities, such as renovating, investing, and refinancing. Property value
increases allow equity to be accessed for various purposes.
Practical strategies include using home equity to fund renovations, buy investment properties, consolidate debt, or start a business. These options align with proven investment property strategies in Australia, helping homeowners achieve their financial goals with careful planning and strategic borrowing.
Key considerations include understanding how much equity is available, lender requirements, and using online calculators to assess equity. With proper guidance, home equity can support growth and improve long-term financial security.
Introduction
In 2025, Australian homeowners are enjoying a period of rising property values, especially in key markets like Brisbane, Perth, and regional New South Wales. This has created a powerful financial resource: home equity.
Home equity is the difference between what your property is worth and how much you still owe on your mortgage. If your house is valued at $900,000 and you owe $500,000, your equity is $400,000. Tapping into this equity can help you renovate, invest, consolidate debt, or fund personal goals.
The versatility of home equity means it can be used for both wealth creation and lifestyle upgrades. However, it’s important to approach it strategically. Borrowing against your equity still involves risk and should be aligned with long-term financial goals. With careful planning, using your home equity can help you achieve milestones sooner and improve your financial position.
This guide explores 13 practical ways Australians are using home equity in 2025, including property investment, refinancing for better rates, and upgrading their homes.
You’ll also find insights into how to calculate your available equity and understand lender requirements. Whether you’re planning a home extension or preparing for retirement, there’s a smart way to make your equity work for you.
What Is Home Equity?
Home equity represents the portion of your home that you truly own — the difference between your property’s current value and your remaining mortgage balance.
For example, if your home is worth $750,000 and your mortgage is $400,000, your equity is $350,000. You can access this equity through a home loan refinance, a line of credit, or redraw facilities, depending on your financial situation and goals.
In Australia, lenders typically allow you to access up to 80% of your property’s value, minus your existing loan. This means if your property is worth $900,000 and you owe $500,000, you may access around $220,000 ($900,000 × 80% – $500,000).
Key points to remember:
Equity builds over time as you repay your mortgage or as property values increase.
The more equity you have, the more borrowing power you may unlock.
Lenders assess your income, credit score, and loan-to-value ratio (LVR) before approving equity access.
Always consider whether the equity will be used for a productive purpose, such as investing, renovating, or consolidating debt. Poor use of equity (like overborrowing for consumption) can increase long-term financial strain.
Use online home equity calculators offered by Australian banks like Commonwealth Bank or ANZ to estimate your accessible equity before applying for a loan.
Use Our Home Equity Calculator to Get Started
Before making any decisions, it’s wise to estimate how much equity you have and how much you can access. A home equity calculator simplifies this process and helps guide your borrowing strategy. These calculators are readily available from major Australian banks, brokers, and comparison sites like Canstar or Finder.
To use a home equity calculator effectively, you’ll need:
Your property’s current market value (based on a recent valuation or estimate)
The outstanding balance on your mortgage
Your current interest rate and repayment amount
Your lender’s maximum loan-to-value ratio (usually 80%)
Example calculation:
If your home is worth $950,000 and you owe $500,000:
80% of $950,000 = $760,000
$760,000 – $500,000 = $260,000 in usable equity
Using this tool helps you understand what is realistic and whether you meet basic lender criteria. However, remember that approval also depends on your income, credit history, and current financial obligations.
A calculator won’t give you a final answer, but it gives a solid foundation to begin discussions with a broker or lender. From there, you can explore the most suitable use of your equity — whether it’s to renovate your home, refinance your mortgage, or invest in property or shares.
Renovate or Extend Your Home
Using home equity to renovate or extend your home is one of the most common and value-adding strategies in Australia. With high construction and relocation costs in 2025, many Australians prefer improving their existing homes rather than buying new ones. It’s often more cost-effective and adds significant value to your property.
Strategic upgrades include:
Kitchen remodels with modern finishes and appliances
Bathroom renovations to update fittings and improve efficiency
Adding a second story or extra bedroom for growing families
Creating an outdoor entertainment area with decking and pergolas
Advantages of using equity for renovations:
Increases resale value and rental appeal
Enhances your lifestyle without changing location
Avoids stamp duty and selling costs of moving homes
For example, using $100,000 of equity to add a modern kitchen and bathroom in a Sydney suburb could raise your home’s value by $150,000 or more. Lenders often view renovation loans positively, especially when backed by property appraisals and builder quotes.
Just be mindful of overcapitalising — spending more than the value added. Always work with licensed contractors and seek multiple quotes. In most cases, you’ll need council approval or permits before beginning major extensions or structural changes.
Buy an Investment Property
Using home equity to invest in another property is a common strategy in Australia’s 2025 real estate market. With strong rental demand in regions like Southeast Queensland and parts of Western Australia—some of the best places to buy investment property in Australia in 2025—many homeowners are leveraging equity to grow their property portfolios.
Equity can be used as a deposit for your next investment purchase. Instead of saving a new deposit, you can tap into existing property value to access funds faster and potentially enter the market sooner.
Example:
Your home is worth $850,000, and your mortgage is $400,000.
80% of $850,000 = $680,000
Usable equity = $680,000 – $400,000 = $280,000 (potential deposit)
Key benefits include:
Accelerates property portfolio growth without new savings
Allows access to rental income and long-term capital growth
May unlock tax benefits like negative gearing or depreciation
Before diving in, consider rental yields, vacancy rates, and future growth potential. Suburbs near infrastructure upgrades, transport links, and job hubs often offer better returns.
Many investors in 2025 are targeting regional areas due to increased remote work flexibility and government development programs—strategies also explored in guides on how you can invest in real estate: 10 simple ways in Australia.
Lenders will assess your overall borrowing capacity, not just available equity. Ensure you can afford repayments even if interest rates rise or if rental income fluctuates. It’s also smart to speak with a mortgage broker or financial adviser to structure your loans for tax and cash flow efficiency.
Used wisely, equity can be a powerful tool for property investment, helping you build wealth over time while taking advantage of market conditions.
Refinance Your Existing Home Loan
Refinancing using your home equity is a strategic way to lower interest rates, reduce repayments, and even access additional funds. In 2025, many Australians are switching lenders to secure better deals amid ongoing market competition.
When refinancing, you replace your current loan with a new one — often with a different lender offering more favourable terms. If your property has risen in value or your financial position has improved, you may be eligible for a lower interest rate and access to equity.
Why Australians refinance in 2025:
To get a better rate (fixed or variable) as competition among banks increases
To consolidate debts into a single, lower-interest loan
To access funds for renovations, investments, or other large expenses
Steps to refinance with equity:
Get a current property valuation to assess how much equity is available
Compare loan products from banks, credit unions, and non-bank lenders
Apply for refinancing and provide documentation (income, expenses, property value)
Benefits include:
Lower monthly repayments if interest rate drops
Extra funds for financial goals
Keep in mind that refinancing may involve exit fees, application fees, and new loan setup costs. Always check the comparison rate (not just the advertised rate) to understand the true cost of switching.
Used effectively, refinancing with equity can improve cash flow and help you reach personal or investment goals without selling your home. It’s important to review your mortgage every few years and compare it with what the market currently offers.
Consolidate Higher-Interest Debts
If you’re juggling personal loans, credit card balances, or car loans, using your home equity to consolidate debt can be a smart financial move in 2025. With home loan interest rates typically lower than unsecured debt rates, you may significantly reduce your repayments.
Debt consolidation involves refinancing your mortgage to access equity, which is then used to pay off high-interest debts. These are rolled into your home loan, resulting in one manageable repayment at a lower rate.
Common debts Australians consolidate with equity:
Credit card balances (often over 18% interest)
Personal loans with short terms and high fees
Car or payday loans
Benefits of this strategy:
Lower total interest paid over time
Easier budgeting with one repayment
Potential to improve credit score with timely payments
Example:
If you have $40,000 in personal loans and credit cards at an average of 16% interest, and refinance into a 6% home loan rate, you could save thousands in annual interest.
However, caution is essential. Extending short-term debt over 20–30 years may cost more in the long run, even at a lower rate. Only consolidate if you’re committed to not racking up new debts and have a clear repayment strategy.
Speak to your lender or a mortgage broker to explore your options. Some lenders even offer specific home loan packages that include debt consolidation features. If used responsibly, this approach can offer financial relief and streamline your household finances.
Fund a Business Venture
Tapping into home equity to start or expand a business is becoming increasingly popular among Australian entrepreneurs in 2025. Instead of seeking business loans with high interest rates and strict conditions, many small business owners are unlocking equity to fund operations, marketing, or inventory.
Why it’s appealing:
Home loan rates are typically lower than business loan rates
Easier access to funds for self-employed individuals
Less reliance on external investors or lenders
Types of ventures equity is funding in 2025:
E-commerce startups and local service businesses
Franchise purchases or expansions
Equipment upgrades and hiring staff
Key considerations:
Prepare a solid business plan to ensure funds are used wisely
Avoid using all your equity — keep a buffer for personal emergencies
Factor in business risks and repayment ability if revenue fluctuates
For instance, a Brisbane couple used $120,000 of their home equity to launch an online wellness brand. Within 18 months, it was generating regular income, allowing them to repay the additional loan faster than expected.
Before committing, consider the risks. Unlike a business loan, your home is used as collateral. If your business fails and you can’t repay the loan, you could lose your property. Always consult an accountant or financial adviser to assess risk tolerance and repayment strategy.
Home equity can provide a flexible and affordable way to realise business goals, provided it’s managed with care and foresight.
Build a Granny Flat or Secondary Dwelling
Using home equity to build a granny flat or secondary dwelling is a growing trend in 2025, particularly in states like NSW, QLD, and VIC. These structures can boost property value and generate reliable cash flow investments by providing passive rental income.
Whether for rental purposes, multigenerational living, or increasing resale value, a well-planned granny flat is a smart use of equity. With rising housing demand, especially in urban and semi-rural zones, local councils are increasingly supportive of secondary dwellings.
Key benefits of building a granny flat:
Generate rental income to help repay your mortgage
Add value to your property for future resale
Support ageing parents or adult children living at home
Popular uses in 2025:
Renting on platforms like Airbnb for short stays
Long-term leasing to students or workers
Home office or studio for remote professionals
Example cost and equity use:
Average granny flat build: $120,000–$180,000
If you have $200,000 in usable equity, you could cover construction without using savings
Check local zoning rules before building. Councils may limit the size, location, and use of secondary dwellings. In NSW, recent planning reforms have simplified approvals, but requirements vary by state and LGA.
Construction should be viewed as an investment. Choose reputable builders, ensure compliance with building codes, and budget for utility connections and landscaping. Rental yields on granny flats can exceed 5–6% annually in high-demand suburbs.
If you’re looking to generate extra income or add flexible space for your family, a granny flat can be a financially smart use of home equity — provided it’s well-executed and legally compliant.
Upgrade to a New Property
Equity can be your stepping stone to buying a new home, whether you’re upgrading to a larger residence or moving to a better location. In Australia’s 2025 market, homeowners are increasingly using equity as a deposit for their next purchase.
Instead of saving from scratch, you can use your current home’s value to partially fund your upgrade — known as a “sell and buy” or “buy before you sell” strategy.
Scenarios where this makes sense:
Growing families needing more space or bedrooms
Moving to better school zones or lifestyle areas
Downsizers looking to access equity while relocating
How it works:
Equity = Current home value – outstanding loan
Up to 80% of your current value can be borrowed
The difference can be applied toward the deposit or stamp duty
Example:
Current home value: $950,000
Outstanding loan: $400,000
Usable equity: $760,000 (80%) – $400,000 = $360,000
This equity can cover a large portion of your new home deposit, especially if combined with the sale proceeds. In competitive property markets like Sydney or Melbourne, this strategy allows faster transitions between properties without missing out on opportunities.
Before committing, consider timing and market conditions. Bridging loans may be needed if buying before selling, but these come with additional interest costs and time limits. Also, review your borrowing power post-upgrade to ensure repayments are sustainable.
Upgrading using equity can fast-track your property journey, offering greater comfort or a more suitable location without having to save for years.
Invest in Shares or Managed Funds
Diversifying your wealth by investing equity into the stock market or managed funds is gaining traction among Australians in 2025. With technology making investing more accessible, some homeowners are using their equity to tap into new opportunities beyond property.
This strategy, often called “gearing into shares,” involves borrowing against your home to invest in assets expected to deliver long-term growth or income — a tactic often considered when evaluating where to invest $100,000 in Australia for the next 5 years.
Popular options for equity investment include:
Exchange-Traded Funds (ETFs) tracking Australian or global markets
Actively managed funds focused on infrastructure or sustainability
High-yield dividend stocks or LICs (Listed Investment Companies)
Benefits include:
Diversification beyond real estate
Potential for higher returns than mortgage interest
Access to franking credits and dividend income
Risks to consider:
Market volatility can affect returns
You’re borrowing to invest — losses could exceed gains
Loan interest is still payable, even if investments underperform
Example:
If your mortgage rate is 6% and your investment returns 9%, the 3% difference is your potential gain — excluding taxes and fees. But if markets drop, you’re still liable for the loan.
Consult with a licensed financial adviser before proceeding. Tax rules around investment loans (like deductibility of interest) are complex, and your risk appetite needs careful assessment.
Used cautiously, investing with equity can grow your financial portfolio and create passive income streams. But it’s not for everyone — especially if you’re risk-averse or close to retirement.
Start or Expand a Business
Tapping into home equity to fund a business is a strategic move for Australians with entrepreneurial ambitions in 2025. Whether you’re launching a start-up or scaling an existing business, equity provides access to funds without selling assets or relying on high-interest unsecured loans.
Why use equity for business purposes?
Interest rates on home equity loans are generally lower than business loans
You retain full ownership without giving up equity to investors
Flexible loan structures support growth, marketing, or equipment purchases
Common uses include:
Opening a new store or online venture
Expanding product lines or service offerings
Hiring staff or upgrading technology
Renovating premises or leasing new space
Example scenario:
You have $250,000 in usable equity and want to open a café. Start-up costs (fit-out, equipment, permits, marketing) total $180,000. You draw on equity via a line of credit, only paying interest on what you use.
Key considerations:
A business plan is essential to guide budgeting and revenue expectations
Make sure your business cash flow can comfortably cover repayments
Factor in economic conditions and industry competition
Risks include:
Your home is the security — if the business fails, your property is at risk
If business income fluctuates, you must still meet loan obligations
Before proceeding, consult with an accountant or small business adviser. Many Australian states offer grants or subsidies for new business owners in 2025 — you may not need to borrow as much as you think. Starting a business is also one of the smart investment ideas for $100K, especially when combined with government support.
Used wisely, equity can be a catalyst for launching or expanding a profitable business, helping Australians build wealth through entrepreneurship.
Consolidate High-Interest Debt
Using home equity to consolidate personal debt is a powerful strategy in 2025, especially for Australians juggling high-interest obligations like credit cards or personal loans. By rolling these debts into your home loan, you can reduce your interest burden and simplify repayments.
Why consider debt consolidation using home equity?
Home loan interest rates are lower than credit cards (often under 7%)
One regular payment is easier to manage than multiple bills
Freeing up cash flow allows faster debt reduction
Common debts to consolidate:
Credit cards (average rate: 18–20%)
Car loans or personal loans
Buy now, pay later (BNPL) balances
Store finance or payday loans
Example:
If you owe $30,000 across 3 credit cards and a car loan, you could refinance and consolidate into your mortgage. Instead of paying $800/month across accounts, your new repayment might be $250/month — freeing $550/month in cash flow.
Benefits:
Pay less interest over time
Improve your credit score by closing multiple debts
Easier to budget and reduce financial stress
Cautions:
Extending short-term debt into a 25–30 year mortgage may cost more in total interest
It’s crucial not to rack up debt again after consolidating
You must maintain discipline to use the savings to pay down the loan faster
Some lenders offer home loan packages specifically for debt consolidation in 2025. Speak to a mortgage broker or financial counsellor to assess the best structure for your needs.
Used responsibly, equity-based debt consolidation is a smart financial clean-up — transforming scattered, costly debts into a manageable solution.
Fund Retirement or Early Retirement
In 2025, many Australians nearing retirement are using home equity to boost their financial freedom. Whether through refinancing, downsizing, or reverse mortgages, equity can supplement superannuation and reduce the pressure on retirement savings.
Ways equity supports retirement:
Funding home improvements for ageing in place
Providing income via a reverse mortgage
Assisting with aged care costs or medical expenses
Enabling a more comfortable lifestyle without relying solely on super
Popular strategies:
Downsizing: Sell your family home, buy a smaller property, and use the leftover funds as retirement income. You may also qualify for the downsizer contribution to super (up to $300,000 per person).
Reverse mortgages: Allows homeowners aged 60+ to borrow against home equity without selling. You repay when you move out, sell the home, or pass away.
Benefits:
Stay in your home while unlocking value
Supplement income to cover rising living costs
Avoid needing to sell investments at a bad time
Risks and considerations:
Reverse mortgage interest compounds, reducing inheritance
You must maintain property and pay insurance
Some Centrelink benefits may be affected
Example:
A 66-year-old couple with $800,000 in equity uses a reverse mortgage to access $150,000 for renovations and living costs, helping delay super withdrawals and preserve long-term funds.
Financial advice is essential before unlocking equity in retirement. The right strategy depends on your health, assets, and lifestyle goals. Equity can provide dignity, freedom, and peace of mind — especially when used in combination with a broader financial plan.
Help Your Children Get into the Property Market
In 2025, skyrocketing property prices across Australia are making it harder for young people to buy their first home. Parents with equity are increasingly stepping in to help — either through gifts, loans, or guarantees backed by their home.
Main ways to use equity to help your kids:
Family guarantee: Use your home equity as collateral so your child can avoid Lenders Mortgage Insurance (LMI)
Equity release loan: Borrow against your property and gift or loan the deposit
Co-purchase: Buy the property jointly with your child, sharing ownership and obligations
Benefits:
Helps kids get on the ladder sooner
Avoids the need for 20% deposit in many cases
LMI savings can exceed $15,000 in major cities
Example:
Your child wants to buy a $700,000 home but only has $30,000 saved. You use $110,000 of your equity as a security guarantee. No money changes hands — but your support helps them avoid LMI and access better loan terms.
Considerations:
If your child defaults, the bank may call on your guarantee
You may need legal and financial advice to protect both parties
Discuss expectations clearly — repayment, co-ownership, and risk sharing
Tips:
Structure support as a limited guarantee, not the full loan amount
Consider formal loan agreements for gifts or shared deposits
Review estate planning — the gift or loan could impact other beneficiaries
Helping your children buy a home can be a rewarding use of equity — but it must be done thoughtfully to protect family harmony and financial stability.
Refinance for Better Terms
Refinancing your home loan using equity is one of the most accessible and beneficial financial moves available to Australians in 2025. With rising interest rates and tighter lending, regularly reviewing your mortgage can result in major savings.
Why refinance?
Secure a lower interest rate
Unlock equity for renovation, investment, or debt consolidation
Adjust loan terms to better suit your financial goals
Common refinance triggers:
Your fixed rate is expiring in 2025
You’ve gained substantial equity through property growth
You want to switch lenders for better features or cashback offers
Example:
Your home is worth $900,000 and your loan is $450,000. You refinance to a lower rate and release $100,000 in equity for an investment property. Your monthly repayments stay similar due to the rate drop.
Benefits:
Access better loan features (offset account, redraw, flexible repayments)
Use equity to grow your portfolio or improve your home
Reduce total interest over the life of your loan
Cautions:
Refinance costs may include valuation, legal, and break fees
Lenders reassess your income, expenses, and credit history
You may extend your loan term, increasing long-term interest if not managed
Pro tip:
Use refinancing as a financial check-in — compare products, assess goals, and consult a broker if unsure. Many Australians are saving $2,000–$5,000 annually just by switching in 2025.
When done right, refinancing is a low-risk way to improve your mortgage setup and access capital tied up in your home — a powerful tool for growing and protecting wealth.
Conclusion
Your home equity is more than just a number — it’s a versatile financial resource. Whether you’re looking to renovate, invest, or improve your lifestyle, these 13 strategies give Australians in 2025 real ways to make equity work smarter. As always, speak with professionals before making major decisions.
Originally Published: https://www.starinvestment.com.au/use-home-equity-australia-2025-renovate-invest-refinance/
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