Home Equity Loan Calculator

A home equity loan — also called an equity release loan or top-up loan — is new borrowing secured against the equity you've built in your property, usually set up as its own loan portion (or sub-account) alongside your existing mortgage. You keep your original loan and its rate; the released amount runs as a separate facility with its own rate, term, and repayment schedule, which is what this calculator models.

It's easy to confuse with three other features that also draw on an existing loan. A redraw only gives you back extra repayments you've already made — there's no new credit limit, just access to money you've effectively already paid off. An offset account holds your own cash in a linked account that reduces the interest charged on your mortgage balance, without increasing what you owe at all. A cash-out refinance replaces your whole mortgage with one larger loan and pays the difference to you in cash, leaving you with a single loan rather than two. A home equity loan is different from all three: it's genuinely new borrowing, up to your usable equity, kept as a separate, trackable portion.

It's also a completely different product from a reverse mortgage, which is restricted to homeowners aged 60+, requires no regular repayments, and lets interest compound onto the loan until the home is eventually sold — see the reverse mortgage calculator if that's the product you're actually comparing.

Your total equity is simply your property's value minus what you still owe. But lenders don't let you borrow all of it — they cap lending at a maximum loan-to-value ratio (LVR), most commonly 80% of the property's value before Lenders Mortgage Insurance (LMI) comes into play. Your usable equity is what's actually accessible at that cap:

usable equity = (property value × max LVR%) − current mortgage balance

Some lenders will go higher — up to around 90% LVR — but that almost always means paying LMI on the new combined balance and, often, a higher interest rate on top. The calculator above lets you toggle between an 80%, 85%, and 90% max LVR to see exactly where that trade-off lands for your numbers.

Releasing equity increases your total debt and, usually, your monthly repayments — even if you never draw down further. Two costs are worth planning for specifically:

• A rate premium. Equity-release and line-of-credit products are frequently priced above a standard owner-occupier principal-and-interest refinance — comparison-site data in mid-2026 shows named home equity loan products from roughly 6% up to over 8% p.a., against headline refinance rates from under 6%. Interest-only equity loans, which many investors choose to maximise cash flow, typically add a further rate loading.
• Lenders Mortgage Insurance above 80% LVR. Push your combined balance past 80% of the property's value and LMI is very likely to apply on top of the loan — it's a one-off premium (sometimes capitalised into the loan) that can run into the thousands of dollars depending on the amount over the threshold. Our LMI calculator breaks the premium down in detail.

Because the released amount is new debt against your home, it's also worth stress-testing the extra repayment against a rate rise before committing — the mortgage calculator and refinance calculator can help model your combined position across both loan portions.

This is the single most common mistake people make with a home equity loan. Deductibility has nothing to do with what secures the loan — it's entirely about what the borrowed money is used for. The ATO calls this the purpose test: interest is deductible under s 8-1 of the ITAA 1997 only to the extent the funds are used to produce assessable income.

In practice:

• Release $140,000 of equity against your home to fund the deposit on a rental property — the interest on that portion is deductible, even though your home (not the rental) is the security. This is a real ATO example: a taxpayer redraws from a personal home loan to pay a deposit, then repays the redrawn amount once the investment loan settles, and the ATO confirms the deduction follows the deposit's use, not the security.
• Release equity to buy a car, fund a holiday, or renovate the home you live in — that interest is not deductible, because the money was used for a private purpose, regardless of the fact your home (an appreciating asset) secures the loan.
• Use part of a released amount for investment and part for private spending — you must apportion the interest on a fair and reasonable basis between the two, and keep records showing the split. The ATO accepts the daily-balance apportionment method set out in TR 2000/2 for exactly this scenario.

Setting the released equity up as its own loan portion — as this calculator models it — makes that record-keeping far easier than releasing equity into a single mixed-purpose account: the interest on a clearly single-purpose sub-account doesn't need ongoing apportionment, only correct classification at the time you use the funds. If you're drawing equity for an investment property, the rental interest apportionment calculator and negative gearing calculator take the analysis further into your annual return.