So, you’ve bought your first home, chipped away at the mortgage, and now you're thinking about the next step — a bigger place, a better location, or just a fresh start. Here’s the good news; your first home may have equity that some borrowers choose to explore when considering future lending options.
Let’s talk about how to use your equity to make that leap.
What Is Home Equity (and Why It Matters)?
Equity is simply the value of your home minus what you still owe on your mortgage. If the property valuation and your loan balance create available equity, some lenders may consider applications that are within their LVR and serviceability criteria.
In some situations, this may reduce the amount of new savings required, depending on lender criteria and your circumstances. You can potentially use the equity in your current home to buy your next one, either by refinancing your loan or setting up a line of credit.
Using Equity for a Deposit: Your Options
There are a few ways to access your equity:
- Loan top-up or cash-out refinance: Increase your current home loan and use the funds as a deposit on your next home.
- Line of credit: Set up a separate facility you can draw on as needed.
- Redraw facility: If you’ve made extra repayments, you may be able to redraw those funds.
Each option works differently, and a broker can explain how lenders assess eligibility for these structures.
A quick heads-up: while equity can feel like "free money", banks still assess your borrowing power based on income, debts, and expenses. So even with strong equity, serviceability is key.
Thinking About Expenses
It’s tempting to use all your equity to maximise your next property budget. But life’s unpredictable, and moving comes with plenty of hidden costs, removalists, legal fees, maybe even temporary accommodation.
Leave yourself a cushion. Being aware of potential costs can help you prepare for the process.
Emotional Moment: Let Your First Home Pay It Forward
You’ve worked hard to get here. Scrimped. Saved. Repaired dodgy plumbing and mowed your own lawn. That effort has grown into real value, and now, it can help open the door to your next chapter.
Understanding how equity works can help you explore options with your broker or adviser.
Ready to Make Your Equity Work for You?
Whether you’re thinking about upsizing, relocating, or just exploring your options, understanding how to tap into your home’s equity is a powerful step forward.
Download the free First Home Buyer e-book for a step-by-step guide that explains how equity is assessed by lenders and outlines key considerations for borrowers thinking about their next property decision.
