If you already own a home, you might be sitting on a hidden opportunity: equity. That extra value can be the key to moving into your next, bigger home – without having to save a full deposit from scratch. In this guide, we’ll walk you through what equity is, how to access it, and how to use it smartly when upgrading your property.
1. What is Home Equity — and Why It Matters
Home equity is the portion of your home’s value that you truly “own,” free of mortgage debt. You can think of it as:
Equity = Current market value of your home – Amount you still owe on your home loan
So, for example, if your home is worth $800,000 and your outstanding mortgage is $400,000, your home equity is $400,000.
As your property value rises or as you pay down more of your mortgage, your equity grows. That growth is what gives you purchasing power when you’re ready to trade up.
Equity can be accessed in different ways — for renovations, big purchases, or as we’ll explore here, for upgrading to a new home.
2. Key Strategies to Access Equity When Upgrading
Before you leap into a new property, it helps to understand the options available to unlock your existing equity. Here are the main strategies:
| Strategy | What It Means | When You’d Use It |
| Refinance / redraw / cash-out refinance | Refinance your current home loan (or existing debt) to access the extra equity as cash or reduce interest costs | When you have strong equity, good serviceability, and want to consolidate or free cash for your next purchase |
| Home equity loan or line of credit (HELOC) | Borrow against your home’s equity (like a second mortgage) with a separate line of credit or loan | If you want flexibility to use funds over time (e.g. for deposit or bridging costs) |
| Bridging loan | A short-term facility that “bridges” the gap between selling your existing home and buying the new one | Useful if your sale settlement and purchase timing don’t align |
| Sell first, then use proceeds + equity | Sell your current home, use the net proceeds as a big deposit, and then finance the remainder | When market conditions are favourable and you want less borrowing risk |
Each approach has pros and cons in terms of interest rates, fees, tax implications (especially if part of the new property is for investment use), and risk. It’s critical to evaluate which route fits your financial position and comfort level.
3. Steps to Using Equity to Upgrade Your Home
Here’s a step-by-step roadmap you can follow:
Step 1: Know your current equity and borrowing power
- Get a recent valuation or estimate of your home’s market value (via a property report or appraisal).
- Check your outstanding mortgage balance and other secured debts.
- Use a borrowing power or serviceability calculator (or consult a lending specialist) to see how much extra you could borrow.
Step 2: Define your “next home” target
- What size, location, or features are you aiming for?
- Estimate the likely purchase price (plus transaction costs, stamp duty, etc.).
- Factor in how much deposit you’ll need beyond the equity you plan to tap.
Step 3: Decide on the equity access vehicle
Choose from the strategies above (refinance, HELOC, bridging loan, etc.), making sure to model the interest costs, fees, and any extra repayments.
Also consider consulting a lending specialist to ensure you embed protections and not overreach.
Step 4: Secure finance approval in principle
Before jumping into property hunting, get pre-approval (or approval in principle) based on your combined home and new loan proposals. That gives you confidence in your budget.
Step 5: Manage the timing (sale vs purchase)
- If you need to sell first, plan for overlapping costs (storage, temporary accommodation, bridging finance).
- If buying before selling, ensure your bridging or equity access structure handles the cash flow risk.
Step 6: Finalise purchase and settle
Once everything aligns—sale, finance, settlement—you can move into your upgraded home. As part of this, ensure you manage the handover, loan structuring, and adjustments (e.g. interest rates, redraw, offset) efficiently.
4. What to Watch Out For (Risks & Pitfalls)
Leveraging equity comes with responsibilities. Here are common traps to avoid:
- Over-borrowing: Stretching too far can leave you vulnerable if interest rates rise.
- Timing mismatches: Buying before selling can lead to double mortgages or bridging stress.
- Costs and fees: Refinancing, bridging loans, exit costs, stamp duty — these can all eat into your net benefit.
- Serviceability risk: Your income and expenses will be scrutinised heavily; lapses can derail approval.
- Interest rate risk: A larger loan means exposure to rate fluctuations — consider fixed vs variable mix.
- Tax implications: If part of your new home is used for investment or business, the interest deductibility may get complex.
Our lending specialists can help you stress-test scenarios and build safety buffers into your plan.
5. Example Scenario (Hypothetical)
Let’s say:
- Current home value: $900,000
- Outstanding mortgage: $350,000
- Equity: $550,000
You’d like to buy a house worth $1,300,000. After stamp duty, fees and buffer, maybe you aim to contribute a deposit of $250,000 from your equity, plus residual cash or savings.
You could refinance or take a cash-out facility to release that $250,000 (or slightly more to cover buffers). Meanwhile, you get pre-approval to borrow the remainder for the purchase.
Using that equity helps reduce how much new loan you need, and accelerates your ability to move sooner rather than waiting years to save the full deposit.
6. Why This Strategy Makes Sense in Today’s Market
- Many homeowners now hold strong equity cushions, thanks to sustained property value growth.
- Interest rates are volatile — locking in better finance terms while your borrowing is lower can help.
- Using equity can fast-track your upgrade without forcing you to rent or delay.
- You retain control over your financing structure (e.g. offsets, redraws, lump sum payments) as you move.
7. Checklist Before You Proceed
✅ Understand your equity position (valuation vs debt)
✅ Work out your target purchase price + buffer + costs
✅ Choose the optimal way to access your equity (refinance, bridging, etc.)
✅ Get lending approval in principle
✅ Align the timing (sale/settlement, bridging)
✅ Account for all costs (fees, stamp duty, exit costs)
✅ Stress-test your ability to service the new larger loan
✅ Consider fallback plans in case of market shifts or delays
Final Thoughts
Upgrading to a larger or better home using your existing equity is a powerful strategy to fast-track your property goals. But it’s not without complexity. The key is careful planning: accurately assessing your equity, selecting the right financing tool, managing timing, and accounting for risks. Speak to one of our lending specialists about refinance or investment options, they can help you move up sooner – while keeping your borrowing under control.
Home loans made simple.
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This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.