Watch your equity build over time

Equity = what the place is worth right now minus what you still owe the bank. You start with equity equal to your deposit (minus buying costs). From there it grows from two engines running at the same time:

• Paying down the loan. Every repayment is part interest, part principal. Early on it's mostly interest, so the loan barely moves — that's why the loan band shrinks slowly at first, then faster. Extra repayments speed this up a lot.
• The property rising in value. If the place grows at, say, 5% a year, that growth compounds — it's calculated on a bigger number each year. Because you borrowed most of the purchase price, that growth lands on the whole property but the gain is all yours (this is "leverage").

In the early years growth usually does more of the heavy lifting than repayments. Over a long hold, the two combine and the equity band can fill most of the chart.

With a 20% deposit you control a property worth 5× your cash. If it rises 5%, that's a 5% gain on the full value — which can be a 25%+ return on the cash you put in. That's the upside everyone talks about.

The same maths runs in reverse: if values fall, the loss also lands on the full property value, not just your slice — so equity can shrink fast, and can even go negative ("underwater") if the property is worth less than the loan. This tool assumes steady growth for illustration; real markets move in cycles, flat for years then jumping. Treat the line as a long-run average, not a forecast.

• Loan is a 30-year principal-and-interest mortgage at the rate shown, held constant for the whole period (real rates move).
• Property value grows at a steady compounding rate each year. illustrative only
• Equity = current property value − loan balance. It excludes selling costs (agent fees, capital gains tax) you'd pay if you sold.
• Buying costs (stamp duty, legals, LMI if your deposit is under 20%) are not deducted from your starting equity here — they're a separate upfront cost. See the stamp duty and borrowing power calculators.
• No allowance for rent, holding costs, renovations or inflation. This shows the equity mechanic, not total return or cash flow.

General information only, not financial advice. Figures reflect typical mid-2026 settings and are rounded. Sources: long-run capital growth ≈ ABS/CoreLogic capital-city averages; rate ≈ RBA/lender variable rates, June 2026.