Your home equity is the property's value minus what you owe on it, and the usable part is smaller than that headline number. Work out the usable figure first, because it decides what a refinance can actually do for you.
Your loan should work as hard as you do. Here is how to calculate your equity and what to check before you act.
How Do You Calculate Home Equity?
Home equity is your property's current value minus your total loan balance. If your home is valued at $X and you owe $Y, your equity is $X minus $Y.
The usable part is lower. Moneysmart notes that borrowers with less than 20 per cent equity might have to pay lenders mortgage insurance (LMI) when they switch, so many borrowers use an 80 per cent loan-to-valuation ratio (LVR) as a reference point. Multiply the valuation by 0.8, then subtract your loan balance. The result is a rough guide to the amount you may be able to borrow without triggering LMI, depending on your lender.
Use your loan balance, not your original loan amount. Every repayment you have made, and any funds sitting in an offset account, changes the picture.
Why Your Valuation Figure Matters
A lender's valuation is what counts, and it can differ from an online estimate or your own view. Online tools are useful for a first look, but the lender sets the number that your usable equity is built on.
A property valuation that comes in lower than expected shrinks your usable equity straight away. Ask your broker to check the likely range before you pay for any application. Recent renovations or a change in your street's sales activity can move the figure either way.
Equity Calculation Example: A Renovation Funded by a Refinance
Consider a paramedic whose loan balance sits at 65 per cent of the home's valuation. At an 80 per cent LVR, that leaves a gap of 15 per cent of the valuation. In this scenario, the gap is more than the $40,000 they want for a renovation.
They refinance to release equity and add $40,000 to the loan. At the illustrative rate of 6.75% p.a. over 25 years, the extra repayment is about $276 a month. That figure is an example only, and your rate will depend on your deposit size and lender.
The outcome is a finished renovation, an equity buffer that stays under 80 per cent LVR, and a clear monthly cost. The trade-off is that the $40,000 now accrues interest for as long as it stays in the loan, and a longer term means more interest paid overall. Planning a project like this? Our renovating your house page covers how the funding side fits together.
Ready to get started?
Book a chat with a Finance & Mortgage Brokers at Paramedic Loans today.
Does More Equity Mean You Can Borrow More?
No. Equity sets the ceiling on the security side, but your income, expenses and debts decide what a lender will actually approve. Under APRA's rules, banks must assess new borrowers' repayments at a rate at least 3 percentage points above the loan rate, and APRA confirmed that buffer would stay in place on 28 May 2026.
A paramedic with plenty of equity but heavy car loan or credit card repayments may find the usable amount shrinks. Use the borrowing capacity calculator alongside your equity figure. Paying down or consolidating other debts can change the result, and our debt consolidation loans page explains the options.
Paramedic pay often includes shift allowances and penalty rates, which lenders may assess differently. Share your payslips with your broker early so the assessment reflects what you actually earn.
What Does It Cost to Refinance and Release Equity?
Refinancing can cost more than it saves, so add up every fee before you commit. Moneysmart lists a possible break fee on a fixed loan, a discharge fee on closing the old loan, an application fee on the new loan, and LMI if you have less than 20 per cent equity.
If your fixed rate is close to ending, timing matters. Break fees apply only to fixed loans ended early, not variable loans. The fixed rate expiry calculator shows what your options look like as the end date approaches.
ASIC's guidance says a refinance should deliver overall cost savings that outweigh any lost benefits, including broker fees, or suit your needs and objectives more closely. If the only gain is a lower repayment from a longer term, you will pay more interest over that longer term, and you should be told this.
Also check what you are giving up. Features such as an offset account or redraw on your current loan may not carry over, and a new lender's terms could differ.
Using Equity for Investment: Check How the Money Is Used
You can use equity to fund an investment purchase, and the tax treatment of the interest depends on how the borrowed money is used. The ATO states that interest on money borrowed for private purposes is not deductible, even if a rental property is the security.
That is why borrowing for an investment is often set up as a separate loan split, so the purpose of each amount is clear. If you are weighing this up, read our pages on debt recycling and buying your first investment property. Negative gearing for established residential properties acquired after 7:30pm AEST on 12 May 2026 is limited from the 2027-28 income year. Net rental losses can then be deducted only against residential property income and capital gains. Eligible new builds and properties held at that time are not affected in the same way. Get advice from your accountant before you commit. Borrowing against your home to invest also puts your home at risk if you cannot meet repayments, and investment returns are not certain.
Run a Loan Health Check Before You Apply
A loan health check shows your equity, your current rate and your features side by side, so you can see whether refinancing is worth the effort. It can save you from a refinance application that does not stack up.
Start with the loan health check. If the numbers point towards a move, our home loan refinancing for paramedics page explains the process from start to finish.
If you are on a loan under the Australian Government 5% Deposit Scheme, check before you refinance. Housing Australia says refinancing with a lender that is not a Participating Lender ends the scheme's benefit, and you cannot increase the loan amount and keep that benefit.
Call one of our team or book an appointment at a time that works around your roster. We will work out your usable equity, check the costs and tell you straight whether a refinance makes sense.
Frequently Asked Questions
How do I calculate my home equity?
Subtract your current loan balance from your property's value. To estimate usable equity, multiply the value by 0.8 and then subtract your loan balance, as many lenders use an 80 per cent LVR as a reference point.
Does a refinance to release equity cost anything?
It can. Possible costs include a break fee on a fixed loan, a discharge fee, an application fee and LMI if you have less than 20 per cent equity. Add these up and compare them to your expected savings before you apply.
Will more equity increase how much I can borrow?
Not by itself. Lenders also assess your income, expenses and debts, and banks must test repayments at a rate at least 3 percentage points above the loan rate.
Is interest on equity I borrow tax deductible?
It depends on what the money is used for. The ATO says interest on borrowings for private purposes is not deductible, so speak with your accountant before you borrow.
