In this article we explain how to calculate how much equity you can use from your house, to buy an investment property. Or use for renovations.

It is not as simple as 1. Your House Value, minus, 2. Your Mortgage Balance.

When we are considering borrowing funds against a property, we must understand that if we use over 80% of the equity in property, we may have to pay LMI (Lenders Mortgage Insurance). Anytime you go over the 80% threshold, LMI becomes applicable. Even if you paid LMI when you first bought the house.

Get your house value, and on the calculator times that by 0.8.

For example, if your home is worth $600,000, type 600,000 X 0.8. = 480,000.

Type your number into the calculator (in this case 480,000), and then minus the mortgage balance. This example, the mortgage balance is $260,000. $480,000 - $260,000 mortgage = $220,000 of Available Equity.

In this scenario, you have access to $220,000, but you are borrowing this against your house. We need to make sure that your income would cover the repayments for the additional debt ($220,000 in this example).

You will need to have your borrowing capacity calculated to check if this new loan will be affordable.