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Home equity is the difference between the market value of a residential property and your mortgage debt. Property equity is the amount you’d make if you sold your property after clearing your mortgage. 

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For example, if the fair value of a property is estimated at AUD$300,000 and you owe AUD$100,000 on the mortgage, your home equity would be AUD$200,000 after selling the property at a fair market value. 

In simple terms, property equity is the accumulated interest on your residential property minus liens.

Some key points to note

Here are the five key points to note about equity if you’re planning to buy a residential property:

  • Residential property equity is the net value after subtracting liens.
  • You can leverage your residential property equity as collateral to access cash in the form of an equity loan.
  • You automatically add equity to your residential property by putting down a deposit of at least 20%.
  • A smaller deposit implies a substantial mortgage and less residential property equity from the start.
  • Residential property equity for your home may fluctuate based on market forces.
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How does residential property equity work?

Assume you purchase a residential property investment worth AUD$300,000 by paying a 20% down payment and obtain a mortgage to fund the AUD$240,000 balance. Your residential property equity would be 20% of the market value.

The property would be worth AUD$300,000, and you’d have contributed AUD$60,000 to the purchase price. Therefore, you’d own only 20% of your residential property or AUD$60,000 worth of it.

Supposing the real estate market booms and your property value doubles, you’d have 60% equity in your apartment. Your property would sell at AUD$600,000, and you’d still owe AUD$240,000 only in mortgage repayment. Although your mortgage loan will remain, your equity in the property will appreciate.

What’s the global trend in residential property equity?

According to a global financial report, residential property purchases between 2010 and 2018 stood at 87.5% for those earning at least AUD$216,000 annually. (2)

The rate of homeownership for those making between AUD$15,000 – AUD$35,000 during the same period was 65%.  Therefore, the demand for real estate property will keep rising based on the market trend.

How does residential property equity grow?

As a person looking to purchase property to build equity, you need to find ways to reduce the debt you owe on your home in time. You can grow your residential property equity in four ways described below:

  1. Through consistent mortgage payments

Monthly repayment goes a long way in reducing your debt and increasing your equity. According to a residential property management services report, consistent monthly payments on a property will cushion you from the negative impact of unstable real estate markets.

Apart from reducing your debt, timely repayments help tap into your home equity in the event of a market crash. However, defaulting on payments can burden you and lower your equity during economic turmoil.

  • Adding value to the property

Residential property surveyors concur that upgrading your residential property investment through innovative improvements can increase your equity. An increase in value translates to a rise in equity at stake.

For instance, if you spend AUD$20,000 to modernise the kitchen or any other part, it’d increase your equity on the property.

A solid residential property management team goes a long way to help advance equity for property. Residential property management service providers are equipped with the current trends in the real estate market and may recommend the best property improvement options to increase home equity.

  • Making a substantial down payment

A larger down payment at closing helps you pay less in lien and other fees throughout the mortgage. The size of your down payment impacts your residential property equity in three ways:

  • It determines the kind of mortgage you qualify for, the conditions and the terms.
  • It’ll determine your monthly repayment and the amount you’ll remain with for insurance, property maintenance and repairs.
  • A significant down payment positions you as a competitive buyer and allows you to negotiate better repayment terms.
  • External factors in the market

The equity on your residential property will appreciate depending on external market factors. For instance, government investment in infrastructure or business investment will increase your equity in a property.

Therefore, it’s essential to liaise with a proactive residential property surveyor. The role of a residential property surveyor is to give proper residential property valuation to a potential buyer.

 An accurate residential property survey will equip you with knowledge of a property’s viability and a possible increase in equity based on trends in the real estate industry.


Residential property equity is an essential factor when looking to purchase a home. As a residential property investor, you can increase your equity in a property by engaging the services of a real estate agent to guide you to make the right choice. Experienced real estate agents collaborate with residential property groups to help clients find a property to meet their needs.