Home Equity 101: How It Works & Why It Matters for Property Investment

If you own a home in New Zealand, chances are you've built up some home equity. But what exactly is equity, and how can it help you on your property investment journey?

What is Home Equity?

Home equity is the difference between the current market value of your property and the remaining balance on your mortgage. For example, if your home is worth $900,000, and you owe $500,000 on your home loan, your equity is $400,000.

Why Does Equity Matter?

Equity acts as a financial springboard. It’s one of the most powerful tools for investors because it can be leveraged to secure finance for additional property purchases without needing to save a large deposit. Yes, you read it right. It's about making your existing assets work harder for you.

How to Access Your Equity

• Top-up your existing Mortgage: Increase your home loan to release funds.
• Apply for a Revolving Credit or Line of Credit on your home loan: Use your equity as security. This gives you flexible access to your equity as security, letting you draw down funds as you need them. 
• Refinance with another lender: Sometimes this provides better rates or gives you more borrowing capacity. You can often get a cash back too which is a bonus. There is a process, but our team can help you navigate this.

Using Equity to Invest

To work out how much usable equity you may have:

Banks typically let you borrow up to 80% of your property's value.

So, if your house is worth $900,000, and your house mortgage is $500,000, you could potentially access up to $220,000 (80% of $900,000 is $720,000; $720,000 - $500,000 = $220,000).

Any equity you have in excess of 20% is often called ‘usable equity’. This amount could form the deposit on an investment property, giving you a foothold in the property market and imbed your long-term investment strategy.

While this sounds exciting and really easy to do, it's vital to be smart about using your equity:

• Can your income handle It? Always remember, any extra lending needs to be supported by your income.
• Shop around for rates: Mortgage rates and terms are always shifting, and vary between banks. Get some proper advice and compare your options with an independent Adviser.
• Don't max out just because you can: Always leave yourself a financial buffer. Life happens, and you want to be prepared for anything.

What's Happening in NZ Lending Right Now (July 2025)

Here's a quick look at the current market vibe:

• Official Cash Rate (OCR): Holding steady at 3.25% (as of July 9, 2025). But the talk is about potential cuts later in the year, possibly bringing it down to 2.75%–3.00%.
• Floating Mortgage Rates: The average floating mortgage rate is approximately 6.42%. However, some individuals may qualify for a discount at this rate.
• Fixed Mortgages Rates: Fixed mortgage rates are available with terms ranging from one year at 4.89% to five years at 5.79%. The average fixed rate is 5.25%.

Your Equity: An opportunity, not just a number.

Home equity is more than a number; it’s an opportunity when used in the right way to grow wealth. With the right structure and advice, you can use it to build long-term wealth through investment in property. If you’re thinking about what’s next, it may be worth exploring how much equity you have, how you could use it to support your future goals.