How you can Strategically Use the Equity in Your Home
Curious what to do with your home equity? Learn how to use it for investing, renovating, or consolidating debt with Imperium Finance.
For many Australians, home ownership is more than just a place to live; it’s also one of the most powerful tools for building long term wealth. Over time, as property values rise and you continue to pay down your mortgage, equity builds quietly in the background.
But once you have equity, the real question is: what should you do with it?
What Is Equity?
Equity is the difference between your property’s current market value and the remaining balance on your home loan.
For example, if your property is valued at $1,000,000 and your loan balance is $500,000, you have $500,000 in equity. However, not all that equity is usable. Most lenders will allow you to access up to 80 percent of your property’s value (sometimes more, depending on your circumstances), meaning your available equity in this case would be around $300,000.
How You Can Use Your Equity
Your home equity can be used strategically to strengthen your financial position, create new opportunities, or even improve your lifestyle. Here are some of the most common ways to put it to work:
1. Purchasing an Investment Property Using equity as a deposit for an investment property is one of the most popular strategies for building long term wealth. It allows you to leverage the value you have already built, without needing to save a separate cash deposit.
With the right investment loan structure, you can grow your property portfolio while keeping your finances flexible and tax efficient.
2. Renovating or Improving Your Home If you love where you live but your home needs an upgrade, accessing equity can fund a renovation that adds both comfort and value.
Whether it’s a kitchen overhaul, a new outdoor area, or an extension, using equity for improvements can enhance your lifestyle and increase the property’s resale potential.
3. Refinancing or Consolidating Debt Equity can also be used to restructure your finances and improve cash flow.
Refinancing your home loan can help you:
Access a better interest rate or loan product
Consolidate multiple debts (such as personal loans or credit cards) into one manageable repayment
Release funds for upcoming expenses or opportunities
Used wisely, this can free up cash flow and reduce your overall interest costs.
4. Funding Business or Lifestyle Goals For business owners, home equity can provide the capital needed to grow or stabilise your business, from purchasing equipment to smoothing cash flow or funding expansion. We can assist in sourcing finance for self-employed borrowers and can help structure this.
For others, it may offer the chance to invest in education, support family goals, or create a financial buffer for greater peace of mind.
A Strategic Note: "Bad Debt" vs. "Tax Ineffective" Debt
Before you access your equity, it's helpful to understand what kind of debt you are moving from and to.
Many people talk about 'good debt' and 'bad debt', but a more in depth way to understand it is:
Bad Debt: This is typically high-interest consumer debt used for depreciating assets. Think credit cards, personal loans, or non-deductible car loans. A key strategy for using equity is often to consolidate and eliminate this "bad debt."
Tax Ineffective Debt: This is a better way to describe your home loan. While the interest isn't tax-deductible, the loan is secured against a high-quality, appreciating asset (your home). It's not 'bad', it's just not working for you from a tax perspective.
Good Debt (Tax Effective): This is debt used to purchase an income-producing asset, like an investment property. The interest on this type of loan is often tax-deductible, helping to offset the income it generates.
When you access the equity in your home, you are often making one of two strategic moves:
Clearing "Bad Debt" (by refinancing it into your lower-rate, "tax ineffective" home loan).
Converting "Tax Ineffective" Equity (by drawing it out to create "Good Debt" for an investment).
Understanding this distinction is key to making a smart financial decision.
When You Should Be Cautious
While accessing equity can open many doors, it’s important to do so strategically. Increasing your loan amount or adding new debt without a clear plan can put unnecessary pressure on your finances.
Consider:
How stable is your income and cash flow?
What will the repayments look like if interest rates rise?
Are you using the funds to generate future value or purely for consumption?
Used for productive or wealth building purposes, equity can be a powerful ally. Used carelessly, it can lead to unnecessary financial strain.
Working With the Right Strategy
The best way to approach equity is with a clear understanding of your goals. At Imperium Finance, we can help you:
Calculate your usable equity
Review your current loan structure
Model different scenarios to see what’s achievable
Map out both short- and long-term options
Every client’s position is different, and so is the most effective use of their equity.
Equity is one of your greatest financial assets however, like any tool, it works best when used with purpose. Whether you are looking to invest, renovate, refinance, or simply explore your options, the key is to make informed decisions that align with your goals and stage of life.