A common misconception is that you can use all your equity to buy another property. In most instances, you could borrow up to 80% of the value of your home.​
For example, here’s how Sarah can calculate her usable equity:​​
1. Calculate 80% of the value of Sarah’s home: $500,000 x 80% = $400,000​​
2. Take the 80% value of Sarah’s home and subtract her current outstanding debt: $400,000 - $320,000 = $80,000.​​
This means Sarah has $80,000 worth of usable equity to put towards a deposit, as well as other buying costs like stamp duty and settlement fees.
If the usable equity isn’t enough to cover the full deposit and any stamp duty and settlement costs, Sarah will also have to make a cash contribution.