Your usable equity is how much of your equity you can access as a loan. Your bank or lender works this out using a Loan to Value Ratio(LVR). When calculating how much equity you can use, most banks look for an LVR that is 80% of the current value of your home. This means your usable equity will be 80% of the value of your home minus the current balance owing on your home loan.
| Your house Current market value $400,000 x 80% LVR |
$320,000 |
| Current outstanding home loan balance |
$220,000 |
| Usable equity | $120,000 |
