When you’re planning your next financial step, whether that’s buying another property, renovating your home, or consolidating debt, one question often comes up:
Should you use the equity you’ve built in your home, or should you rely on your cash savings?
There isn’t a single answer that suits everyone.
For some Australians, releasing equity can help them move forward sooner without waiting years to save another deposit. For others, using cash savings may provide greater peace of mind by avoiding additional borrowing.
The important thing is understanding how each option works, what the trade-offs are, and which approach best supports your long-term financial goals.
What Is Equity Release?
Equity is the difference between your property’s current market value and the amount you still owe on your home loan.
For example, if your home is worth $900,000 and your remaining loan balance is $500,000, you have $400,000 in equity.
That doesn’t necessarily mean you can access the entire amount.
Most Australian lenders generally allow borrowers to access up to 80% of their property’s value, subject to lending criteria and serviceability requirements. This is often referred to as usable equity.
One of the most common ways to access this equity is through refinancing. Depending on your circumstances, you may be able to increase your existing loan and use the additional funds for purposes such as:
- ✓ Purchasing another property
- ✓ Renovating your home
- ✓ Consolidating higher-interest debts
- ✓ Funding significant life expenses
- ✓ Investing to build long-term wealth
For older Australians, other options such as reverse mortgages or the Government’s Home Equity Access Scheme may also be available. However, for most working homeowners, refinancing remains the most common approach.
While equity release can create new opportunities, it’s important to remember that you’re increasing the amount you’ve borrowed against your home. Any decision to access equity should fit within your broader financial strategy, not simply provide access to extra cash.
What About Using Cash Savings?
Cash savings take a very different approach.
Instead of borrowing against your home, you’re using money you’ve already accumulated through regular saving.
Many borrowers prefer this option because it doesn’t increase their debt or monthly loan repayments. Using your own savings can also provide greater confidence when making financial decisions, particularly if you’re preparing for a major purchase or want to avoid taking on additional financial commitments.
Cash savings can be useful for:
- Funding part of a property purchase
- Paying for renovations
- Covering upfront buying costs
- Reducing the amount you need to borrow
- Providing a financial buffer during uncertain periods
Unlike borrowing, cash doesn’t attract interest costs. Every dollar you contribute from your own savings is one less dollar you’ll pay interest on over the life of a loan.
The trade-off is that saving enough money often takes time. Waiting to accumulate a larger deposit may delay your plans, especially if property prices continue to rise while you’re saving for a home deposit.
The Advantages of Using Equity
For many homeowners, equity represents years of mortgage repayments and property growth. Rather than letting that value remain untapped, some choose to put it to work. Using equity can offer several potential benefits.
It can help you move sooner
Instead of waiting years to save another deposit, you may already have enough usable equity to support your next property purchase or renovation.
It allows you to leverage an existing asset
Rather than selling your home, you may be able to use part of its value to help fund another financial goal while continuing to own the property.
Borrowing costs are often lower
Because the loan is secured against your property, interest rates are generally lower than those associated with personal loans or credit cards.
It can support long-term wealth building
Many Australians use equity to purchase investment properties or make improvements that increase the value of their existing home.
When used strategically, equity can become a tool that helps accelerate long-term financial goals instead of simply sitting unused.
The Advantages of Using Cash Savings
Although equity often receives more attention, cash savings still offer several important advantages.
You avoid increasing your debt
Using your own savings means you don’t need to borrow more money or increase your mortgage repayments.
You reduce long-term interest costs
Every dollar paid from savings reduces the amount borrowed, which can lower the total interest paid over the life of your loan.
You maintain greater financial certainty
Without additional debt, you’re less exposed to future interest rate increases or changes in lending conditions.
You have complete control
Cash is immediately available and doesn’t require lender approval, property valuations, or refinancing applications before it can be used.
For borrowers who value certainty and lower financial commitments, using savings can be an attractive option.
Do You Have to Choose One or the Other?
Not necessarily.
Many borrowers don’t rely entirely on equity or entirely on savings. Instead, they combine both approaches.
For example, someone purchasing another property might contribute part of the deposit from their savings while releasing only enough equity to cover the remaining costs. This approach can reduce the amount borrowed while preserving some savings for unexpected expenses after settlement.
Similarly, a homeowner planning renovations may choose to fund part of the project with savings and use equity only for larger structural improvements.
Using a combination of both strategies can provide greater flexibility and help balance opportunity with financial security.
The key isn’t choosing the option that allows you to borrow the most or spend the least. It’s choosing the approach that supports your goals while leaving you in a comfortable financial position both now and in the future.
The Risks and Trade-Offs of Each Approach
Both equity release and cash savings can help you achieve your next financial goal. The difference is that each comes with its own set of trade-offs. Understanding those trade-offs before making a decision can help you avoid unnecessary financial pressure later.
When Equity Release May Make Sense
Equity release isn’t about accessing money simply because it’s available. It works best when there’s a clear purpose behind it. For many homeowners, that may include:
- ✦ Purchasing another property
- ✦ Funding renovations that add value
- ✦ Consolidating higher-interest debt
- ✦ Investing to build long-term wealth
- ✦ Improving overall financial flexibility
Using equity can also make sense if waiting several more years to save would significantly delay your plans, such as when leveraging equity to buy an investment property.
However, borrowing more should always be supported by a realistic budget and confidence that higher repayments remain affordable, even if interest rates increase.
When Cash Savings May Be the Better Choice
In other situations, using cash savings may provide greater confidence and financial stability. Cash may be the better option if:
- ✦ You’re working towards a short-term goal.
- ✦ You want to minimise additional debt.
- ✦ Your income is uncertain or likely to change.
- ✦ You’re approaching retirement.
- ✦ You want to preserve borrowing capacity for future opportunities.
- ✦ You already have a healthy emergency fund and can comfortably use part of your savings.
Many financial advisers recommend maintaining an emergency buffer of three to six months’ living expenses before committing significant amounts of savings to another financial goal.
Having readily available cash can provide valuable peace of mind if unexpected expenses arise.
What Lenders Will Consider
Even if releasing equity appears to be the right strategy, lenders still need to determine whether additional borrowing is suitable. They’ll typically assess:
This is why two homeowners with similar property values may receive very different lending outcomes.
Borrowing capacity isn’t based solely on how much equity you have. It’s also based on your ability to service the loan responsibly.
Common Myths About Equity and Cash Savings
There are plenty of misconceptions that can make these decisions more confusing than they need to be.
“If I have equity, I should use it.”
“Cash is always the safer option.”
“Using equity is free money.”
“You have to choose one approach.”
Questions to Ask Before Deciding
Before choosing between equity release and cash savings, it’s worth asking yourself a few important questions:
What am I trying to achieve?
Do I have enough emergency savings?
Can I comfortably afford higher repayments if I borrow more?
How stable is my income?
What happens if interest rates increase?
Will this decision improve my financial position over the long term?
Would using a combination of equity and savings leave me in a stronger position?
These questions often provide greater clarity than focusing solely on how much equity or cash you have available.
Final Thoughts
Choosing between equity release and cash savings isn’t about finding a universally better option. It’s about selecting the strategy that best supports your financial goals, your lifestyle, and your ability to manage future commitments.
For some borrowers, using equity can create opportunities that would otherwise take years to achieve. For others, relying on savings provides greater certainty and reduces financial pressure. Many find that combining both approaches offers the right balance.
A mortgage broker can help you understand how much equity you may be able to access, how it could affect your borrowing capacity, and whether your current loan structure still supports your next property goal.
Neither equity nor cash savings is automatically the better option. The right choice is the one that helps you move closer to your goals without putting unnecessary pressure on your finances.