How do I calculate the equity in my property portfolio?

Your total equity is the combined current value of all your properties minus everything you still owe on them. The equity you can actually borrow against, called usable equity, is usually much smaller: for each property it is generally 80% of its value minus that property's loan balance.

Total equity

Total equity = (value of property 1 + property 2 + …) − (all loan balances)

This tells you your net position across the portfolio. Use realistic values: a recent bank valuation is more reliable than an online estimate.

Usable equity

Usable equity = (80% × property value) − loan balance

Work this out property by property, then add up the results. In most cases lenders let you borrow up to 80% of a property's value, and going above that usually means paying lenders mortgage insurance. Each lender has its own limits and will check your income and expenses as well, so treat this as a planning figure, not a promise.

Worked example (illustrative figures only)

Investment 2 is above 80% LVR, so it adds no usable equity. A property cannot go below zero in this column.

Things that change the result

• Valuations: a lender's valuation may come in lower than you expect
• Offset accounts: money sitting in an offset reduces the interest you pay but not the loan balance a lender uses
• Cross-securitised loans: if one loan is secured by several properties, the lender assesses them together
• Serviceability: usable equity only helps if you can also afford the extra repayments

Keeping equity up to date

Equity changes every time values move or you make a repayment. Opulo calculates equity for each property and for your whole portfolio, so you can see where you stand without rebuilding the sums each time.

Sources

• Bankwest: Using equity to buy an investment property
• Mozo: Equity versus loan to value ratio