Property equity and LVR calculator

Equity is not the same as borrowing room

Equity is simply the property's value minus what you owe on it. Borrowing room is smaller, because a lender won't lend right up to the value. It keeps a margin in case the property ever has to be sold, and that margin is expressed as a maximum loan-to-value ratio. If a lender's ceiling is 70% and the property is worth $1,200,000, total lending can reach about $840,000. Subtract the existing $500,000 mortgage and the room for a new loan is roughly $340,000, even though equity on paper is $700,000.

Why property type changes the answer

Lenders think about how quickly and reliably a property could be sold. A house in a capital city suburb usually has a deep pool of buyers; a specialised industrial building or a rural block has fewer. That's why the calculator applies a lower illustrative ceiling to commercial, rural and specialised property. Real ceilings vary by lender, location, loan position and the strength of the rest of the application. Our page on loan-to-value ratio explains the bands in more depth.

First mortgage, second mortgage or caveat?

If nothing is owing, a new business loan can usually sit in first position. If a home loan is already registered, the new loan can sit behind it as a second mortgage, or in some short-term cases be protected by a caveat. The total LVR shown above is what all of them add up to, which is the number a secured lender focuses on first.

Before you rely on the figure

Try the calculator again with a value 10% lower than you expect. If the deal still works, you have a buffer against a conservative valuation. Then tell us about the property and what the money is for through the enquiry form. Enquiring involves no credit check, your details aren't passed around a list of lenders, and a real person will come back to you with an honest read on what the property can support.