Refinancing to access equity lets you tap into the value you've built in your property without needing to sell.
If you've owned your home for a few years or seen property values rise in your area, you might be sitting on more equity than you realise. Refinancing to release that equity means you can fund renovations, add value to your property, and potentially secure a lower interest rate at the same time. It's one of the more common reasons people come to us when their needs have changed since they first bought.
Consider a homeowner in Newcastle who purchased a three-bedroom terrace for $650,000 five years ago. The property is now valued at $820,000, and they've paid the loan down to $480,000. That leaves them with $340,000 in equity. They want to renovate the kitchen and bathroom and add a deck, which will cost around $80,000. Rather than taking out a personal loan at a higher rate, they can refinance their home loan to access that equity and roll the renovation costs into their mortgage.
The process involves applying to either your current lender or a new one to increase your loan amount based on the updated property valuation. If the numbers work, you'll receive the additional funds after settlement, and your repayments will adjust to reflect the new loan amount. Depending on what's changed since you first borrowed, you might also access a lower interest rate or move to a loan with an offset account or redraw facility.
What happens during a refinance application to access equity
Your lender will order a property valuation to determine how much equity you have. Most lenders allow you to borrow up to 80% of your property's current value without needing to pay lenders mortgage insurance. If your home is valued at $820,000, that means you could borrow up to $656,000. If your existing loan sits at $480,000, you could access up to $176,000 in equity while staying within that threshold.
The lender will also assess your income, expenses, and credit history to confirm you can service the higher loan amount. If your income has increased or your living costs have dropped since you first borrowed, you might find the application process more straightforward than expected. If you're planning to add value to the property through renovations, some lenders will consider the post-renovation value, but that's less common and usually requires detailed quotes and plans.
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Once approved, the funds are typically released at settlement. You can choose to receive them as a lump sum or have the lender pay the builder directly in stages, depending on how the loan is structured. If you're undertaking a significant renovation, it's worth discussing whether a construction loan structure might suit your situation, particularly if the work will be completed over several months.
Why refinancing to access equity can cost less than other options
Home loan interest rates are almost always lower than personal loan or credit card rates. At current variable rates, the difference can be several percentage points. If you're borrowing $80,000 for renovations, paying mortgage rates instead of personal loan rates could save you thousands in interest over the life of the loan.
There are still costs involved. You'll pay for the property valuation, discharge fees from your current lender if you're switching, and application or settlement fees with the new lender. Some lenders also charge ongoing fees depending on the loan structure. A loan health check can help you work out whether the interest savings outweigh the upfront costs, particularly if you're also moving to a loan with more suitable features.
If your fixed rate period is ending and you're refinancing anyway, accessing equity at the same time can make sense. You're already covering the application costs, so you're not doubling up on fees. Many people coming off a fixed rate find they can switch to a lower variable interest rate and release equity in a single transaction.
How much equity you can access depends on your loan-to-value ratio
Lenders calculate your loan-to-value ratio by dividing your total loan amount by the property's value. If you want to borrow $656,000 against a property valued at $820,000, your LVR is 80%. Staying at or below 80% means you avoid paying lenders mortgage insurance, which can add thousands to your costs.
If you need to borrow more than 80%, it's still possible, but the lender will charge LMI and your interest rate might be higher. In our experience, most people prefer to keep their LVR at 80% or below and adjust their renovation budget accordingly. If the work you're planning will genuinely increase the property's value, you might recover that equity quickly, but it's worth running the numbers before committing.
Your current lender might offer to increase your loan without requiring a full refinance application. That can save you time and money on discharge and application fees, but it also means you won't have the opportunity to compare what else is available. If your current rate is higher than what's available elsewhere, switching lenders while accessing equity can improve your cashflow and reduce your loan costs over time.
When refinancing to access equity makes sense and when it doesn't
Refinancing to fund renovations works well when you're planning improvements that add value to the property or make it more liveable for your household. Kitchen and bathroom updates, adding a second living area, or improving outdoor spaces tend to offer a return, either in resale value or in how much you enjoy living there.
It's less suitable if you're borrowing to cover ongoing expenses or lifestyle costs that don't add value. Extending your mortgage to pay for a holiday or a car might feel manageable in the short term, but you'll pay interest on that amount for the life of the loan unless you make extra repayments. If your goal is to consolidate debt, that's a separate conversation and worth discussing with a broker who can look at your full financial position.
Timing matters too. If you're planning to sell within the next year or two, taking on a larger loan and paying refinance costs might not leave you ahead. If you're staying put for the medium to long term and the renovations will improve your quality of life or the property's value, accessing equity through a refinance can be a practical way to fund the work without depleting your savings.
If you're ready to explore what's available or want to understand how much equity you can access, call one of our team or book an appointment at a time that works for you. We'll walk through your property valuation, your current loan structure, and what refinancing could look like in your situation.
Frequently Asked Questions
How much equity can I access when refinancing my home loan?
Most lenders allow you to borrow up to 80% of your property's current value without paying lenders mortgage insurance. If your home is valued at $820,000 and your loan is $480,000, you could access up to $176,000 in equity while staying within that threshold.
What costs are involved in refinancing to access equity?
You'll typically pay for a property valuation, discharge fees from your current lender if you're switching, and application or settlement fees with the new lender. These costs need to be weighed against the potential interest savings and the benefit of accessing equity at mortgage rates rather than higher personal loan rates.
Can I refinance to access equity if my fixed rate period is ending?
Yes, and it can be a practical time to do so. You're already going through a refinance process as your fixed rate expires, so you can access equity and potentially secure a lower variable interest rate in a single transaction without doubling up on application costs.
Is it worth refinancing to access equity for renovations?
It depends on your plans and how long you intend to stay in the property. If you're funding improvements that add value or improve liveability and you're staying put for the medium to long term, refinancing to access equity at mortgage rates is often more suitable than using personal loans or credit cards.
Do I need to switch lenders to access equity in my home?
Not necessarily. Your current lender might increase your loan amount based on a new valuation, which can save you discharge and application fees. However, switching lenders gives you the opportunity to compare rates and features, which could reduce your interest costs over time.
