Home Equity Loan Calculator
Calculate Your Risk
Let’s be honest-when your home’s value goes up, it feels like free money is sitting there waiting to be used. You see the numbers on your statement, hear stories about people using their equity to pay off debt, fund renovations, or even take a dream vacation, and it’s tempting. But here’s the truth most people don’t tell you: taking equity out of your home is one of the riskiest financial moves you can make, especially if you’re not prepared for what comes after.
You’re Not Getting Free Money-You’re Borrowing Against Your Future
When you take equity out, you’re not tapping into a savings account. You’re taking out a loan secured by your home. That means the bank now has a legal claim on your property. If you can’t keep up with payments, they can foreclose. In Australia, over 12,000 homeowners lost their homes to foreclosure between 2020 and 2024, and nearly 30% of those cases involved equity release products. That’s not a statistic-it’s a real person, maybe someone you know, who thought they were unlocking wealth but ended up losing everything.
Equity isn’t cash in the bank. It’s paper value. And paper value can vanish overnight. The Australian housing market has seen dramatic swings since 2022. Cities like Sydney and Melbourne dropped 10-15% in value within 18 months. If you took out $150,000 in equity when your home was worth $900,000, and now it’s worth $750,000, you’re already underwater. That’s not just a loss-it’s a trap.
Interest Rates Are Rising, and Your Payments Will Hurt
Most equity release options in Australia today are either home equity loans or cash-out refinances. Both come with variable interest rates. As of early 2026, the average rate on these products is 7.8%, up from 3.9% just three years ago. That means if you borrowed $100,000 at 4%, your monthly payment was around $475. Now? It’s $740. That’s an extra $265 every month-$3,180 a year-that you didn’t budget for.
And here’s the kicker: lenders don’t lock in rates for long. You might get a low rate for six months, then watch it climb. There’s no guarantee it’ll come back down. If you’re on a fixed income, nearing retirement, or working a job that’s not secure, this kind of payment shock can be devastating.
You’re Trading Stability for Short-Term Relief
People often take equity out to pay off credit card debt or student loans. It seems smart-lower interest, right? But here’s what happens next: they stop using credit cards, feel relieved, and then… start using them again. Within two years, they’re back to square one-with more debt.
That’s called debt recycling. It’s not a strategy-it’s a cycle. A 2023 study by the Australian Securities and Investments Commission found that 61% of homeowners who used equity to pay off unsecured debt ended up with higher total debt within five years. Why? Because they didn’t change their spending habits. They just moved the debt from one place to another and made it harder to escape.
And what about renovations? You think adding a new kitchen or bathroom will boost your home’s value. Sometimes it does. But in most cases, you won’t recoup even 70% of what you spent. A $50,000 kitchen upgrade might add $30,000 to your home’s value. You’ve spent $50,000, borrowed $50,000, and now owe more than you did before. You didn’t build wealth-you built a bigger loan.
It Limits Your Future Options
Imagine you’re 58 years old. You’ve worked hard. You’ve paid off your mortgage. You’re finally starting to feel secure. Then you take out $120,000 in equity to help your adult child with a deposit. You think, “I’ll be fine-I’ve got another 15 years to work.”
But what if you lose your job? What if your health declines? What if interest rates jump again? Now you’re stuck with a $120,000 loan, no savings, and no way to sell your home without owing money. Retirement isn’t about having a house-it’s about having choices. Taking equity out removes those choices.
And if you’re thinking, “I’ll just sell later,” think again. Selling a home with a large loan on it means you walk away with less-or nothing. In 2024, 43% of Australians over 60 who sold their homes after taking equity out had zero proceeds left after paying off the loan and fees.
There Are Better Ways to Get Cash
You don’t need to tap your home to solve financial problems. Here’s what actually works:
- If you need money for emergencies: Build a $5,000-$10,000 emergency fund. Start small. Even $200 a month adds up.
- If you need to pay off debt: Use a balance transfer credit card with 0% interest for 12-18 months. Or negotiate with creditors-they often offer repayment plans.
- If you need cash for home improvements: Apply for a government home energy grant. In NSW, you can get up to $6,000 for solar panels or insulation. No loan required.
- If you’re helping family: Set a boundary. Give what you can afford without touching your home. You’re not a bank.
There’s always a better option than putting your home on the line.
The Hidden Costs Nobody Talks About
Most people focus on the interest rate. But the real cost is hidden in fees, penalties, and lost opportunity.
- Application fees: $500-$1,500
- Valuation fees: $300-$600
- Legal fees: $800-$1,200
- Early repayment penalties: Up to 3% of the loan amount
- Lost equity growth: If your home grows 5% a year, $100,000 in equity today could be worth $163,000 in 10 years. By borrowing it now, you lose that growth.
And if you’re using a reverse mortgage (common among older Australians), you’re not just borrowing-you’re compounding interest. That means your debt grows every month, even if you make no payments. In 2025, the average reverse mortgage balance in Australia was $215,000. That’s not retirement income-that’s a time bomb.
What If You Really Need the Money?
Let’s say you’re facing a medical emergency, or your income disappeared overnight. In those rare cases, equity release might be the last resort. But even then, there are steps you must take first:
- Speak to a free financial counsellor (call 1800 007 007). They’ll help you explore every alternative.
- Get a second opinion from a mortgage broker who doesn’t earn commission on equity loans.
- Ask yourself: “Will this decision still make sense if my home value drops another 10%?”
- Never sign anything without reading the fine print. Look for “negative equity protection”-most products don’t offer it.
If you still move forward, borrow the smallest amount possible. Don’t take out $150,000 if you only need $50,000. Every dollar you borrow increases your risk.
Final Thought: Your Home Isn’t an ATM
Your home is where you sleep, where your kids grew up, where you feel safe. It’s not a financial product. It’s your foundation. Once you start treating it like one, you risk losing more than money-you risk losing stability, peace of mind, and control over your future.
There’s no shame in needing help. But there’s huge risk in using your home to get it. The smartest thing you can do isn’t to take equity out-it’s to protect it.
Is it ever safe to take equity out of my home?
It’s only potentially safe if you’re in a very specific situation: you have a guaranteed, long-term income, you’re borrowing a small amount for a high-return investment (like energy upgrades with government rebates), and you’ve already paid off other high-interest debt. Even then, the risks often outweigh the benefits. Most people are better off finding other ways to solve their financial problems.
What happens if I can’t repay the equity loan?
If you default on an equity loan, the lender can initiate foreclosure proceedings. In Australia, lenders must follow strict legal steps, but they can still take possession of your home if the debt remains unpaid. This isn’t rare-it happened to over 12,000 households between 2020 and 2024. Many of these homeowners were retired or on fixed incomes, thinking they were safe because they weren’t making monthly payments. But interest kept compounding.
Can I lose more than my home’s value?
With most standard equity release products in Australia, you can’t owe more than your home is worth-thanks to negative equity protection. But not all products offer this. Some reverse mortgages and private lenders don’t. Always check the fine print. If the contract doesn’t explicitly say “you won’t owe more than your home’s value,” assume you could be on the hook for the rest.
How does equity release affect my Centrelink benefits?
If you receive the Age Pension or other Centrelink payments, the money you get from equity release is treated as a loan, not income. But if you deposit it into a bank account, it becomes an asset. Centrelink assesses assets when calculating your pension. A large cash balance could reduce or cut your payments. Always speak to a Centrelink financial adviser before proceeding.
Are there alternatives to equity release for seniors?
Yes. The government offers the Pension Loans Scheme, which lets eligible seniors receive regular payments against their home’s equity without taking out a loan. There’s also the Home Equity Access Scheme, which provides up to $1,500 per fortnight tax-free. These are safer than private equity products because they’re backed by the government, have capped interest rates, and include negative equity protection.
If you’re considering equity release, pause. Ask yourself: Am I solving a problem-or creating a bigger one? The answer might save you more than money-it might save your home.