Release the Value in Your Home With an Equity Loan
Buy the next property without waiting years to save another deposit. An equity loan borrows against what your NSW home is worth today, generally up to 80% of its value less what you still owe, so the deposit may already be sitting in the property you own.
How Much You Can Borrow
An equity loan is capped by what lenders call usable equity, which is usually less than the equity you think you hold, because your existing mortgage sits inside the same 80% ceiling.
Take a home valued at $1.2 million with $500,000 owing. That sets the ceiling at $960,000, leaving $460,000 before servicing is considered. Some lenders will consider more than 80%, though the portion above that line attracts lenders mortgage insurance.
The valuation that counts is the lender's, not an agent's appraisal, and valuations can differ between lenders on the same property.
Holding equity and being approved to use it are separate tests, so an owner with equity and tight cash flow may be offered less than the calculation suggests, or nothing. A Sydney mortgage broker can check your position against several lenders' policies and tell you which are worth applying to.
Ways to Structure the Borrowing
The structure you choose affects timing, cost and how the funds are tracked later:
Cash-Out Refinance
Your whole loan moves to a new lender and the equity is released in the same application. It suits owners whose current lender declines the increase or values the property conservatively. Discharging the existing loan adds time, so allow longer than a top-up.
Loan Top-Up
Your existing lender increases the current loan and pays out the difference. It is usually the quickest route, since the lender already holds your file. Not every lender offers it, and some cap the increase or restrict what the funds may be used for.
Separate Equity Split
The released amount sits in its own sub-account beside your home loan. Keeping it separate makes the purpose of each portion traceable, which matters when an accountant reviews it later.
Line of Credit
The lender approves a limit you draw on as needed, with interest charged only on the amount used. It suits spending staged over months. Rates on these facilities are typically higher than a standard home loan.
Renovation Drawdown
Funds are released in stages as building work progresses, with the lender inspecting before each payment. It suits work that lifts the property's value. Most lenders want a fixed-price building contract and a licensed builder before approving.
Who an Equity Loan Suits
Established Property Owners
Owners who have held a property for several years through NSW price growth have the most equity to work with, particularly where the plan is a rental purchase, a renovation or a consolidation of higher-rate debt into secured borrowing.
Funding a Rental Purchase
On a rental purchase, the released funds become the deposit and a separate loan covers the balance. Our investment property loan broker page sets out how lenders assess that second loan.
It suits fewer people than the arithmetic suggests. Owners who bought recently, who are already close to the 80% line, or whose income has dropped since settlement may find it does not work. Where the purpose is covering short-term living costs, we set out the risks of securing that spending against your home before you go further.
What Lenders Check Before Approving
Lenders weigh four things, and a weak result in any one can reduce the amount offered:
Current Property Value
A formal valuation sets the ceiling. Desktop valuations are faster and cheaper, though lenders may insist on a full inspection for larger releases or unusual properties.
Income and Commitments
Banks and other deposit-taking lenders test the increased repayment against your income at 3 percentage points above the actual rate, a buffer the Australian Prudential Regulation Authority sets. Lenders outside that system apply a buffer of their own. Credit card limits count in full even where the balance is nil.
Repayment Record
Missed or late payments on the existing loan over the past six to 12 months will usually stop a top-up. Some lenders look further back than others.
Loan Purpose
Most lenders ask what the money is for, and many require evidence above a set threshold. Some will not fund a tax debt or a loan to a third party.
How the Process Runs
Timing depends on the lender and the valuation, though two to four weeks from first call to funds available is common. Changing lenders may take longer:
Mapping Your Position
We confirm the likely valuation range, calculate the usable figure and test whether your income supports the larger loan. You are asked for recent payslips or business figures, your current loan statement and a list of existing debts.
Ordering Your Valuation
We order valuations with the lenders whose policy fits your purpose, then work from the figure that holds up. A desktop valuation may return the same day, while a full inspection usually takes several days to book.
Lodging Your Application
We prepare the file, submit it and manage the lender's questions and conditions. You are told what is outstanding and who it sits with.
Drawing Your Funds
After settlement, the money is available as a lump sum, a split account or an approved limit, depending on the structure chosen. Your lender confirms the new repayment and the date it starts.
No application is lodged until you have chosen a lender.
What It Costs and How We Are Paid
Costs vary by lender and by how the loan is set up:
Lender and Valuation Fees
Expect an application or settlement fee, and a valuation fee where the lender does not absorb it. Discharge fees apply where you leave your current lender.
Lenders Mortgage Insurance Above 80%
The premium is charged once and is usually added to the loan. The amount depends on the loan size and the portion above 80%.
Break Costs on Fixed Rates
Ending a fixed-rate period early may attract a break cost calculated by the lender. The amount depends on rates at the time and cannot be quoted in advance.
Commission From Lenders
We are typically paid a commission by the lender that settles your loan. Any fee payable by you is set out in writing before you commit.
What You Gain and What You Give Up
What You Gain
You release equity without selling, at a secured rate usually below unsecured borrowing, and the property stays yours while the money goes elsewhere.
What You Give Up
Your repayments rise, the total interest over the life of the loan grows, and a cash-out refinance may reset the term to 30 years. Your home secures money spent elsewhere, so trouble with the investment can reach the property you live in. Should values fall, the larger loan stays where it is.
How you use the funds affects tax treatment. The Australian Taxation Office (ATO) states that interest cannot be claimed as a deduction on a loan used to buy a home that does not produce income, even where a rental property secures that loan, as set out in its guidance on rental interest expenses. Your accountant should confirm how the ATO position applies to you before the loan is structured.
Why NSW Homeowners Work With Us
We have access to more than 40 lenders and are owned by none of them, so the comparison runs across the panel instead of one product set.
DIY Lending is a Corporate Credit Representative of Finsure Finance & Insurance Pty Ltd, Australian Credit Licence 384704. We are a member of the Mortgage and Finance Association of Australia and of the Australian Financial Complaints Authority (AFCA). AFCA gives you an external avenue if a complaint is not resolved with us.
Find Out What Your Equity Can Fund
The figure you have in mind may be higher or lower than what a lender will approve, and only a valuation and a servicing check will close that gap. We run both for owners across NSW, and where the numbers do not support the release, we say so instead of lodging an application likely to be declined. Call 02 8806 7258 or send your details through.
Frequently Asked Questions (FAQs)
How much equity can I access?
Most lenders work to 80% of the property's current value less your outstanding loan, and some will consider up to 90%. The final amount also depends on your income and existing commitments.
Do I have to change lenders?
No. Where your current lender offers a top-up and values the property adequately, staying put is usually faster and cheaper. We compare both paths and show you the difference before you decide.
What if the valuation comes back lower than I expected?
The available amount drops accordingly, and we can order a second valuation with a different lender.
Can I use released equity for something other than property?
Often, though purpose rules vary by lender. Renovations, business capital and debt consolidation are commonly accepted.
Can I release equity if I am self-employed?
It may be possible. Lenders typically want two years of tax returns, though some assess self-employed applicants on business bank statements or an accountant's declaration where standard documents are not available.
What does the first conversation cost?
Nothing, and it does not commit you to an application. You leave knowing your usable equity figure, whether your income supports it and what proceeding is likely to cost.
This page contains general information only. It does not take your objectives, financial situation or needs into account, and it is not a recommendation to enter into any credit contract. Figures, thresholds and lender requirements change, and the outcome for your situation depends on your circumstances and the lender assessing you. You may wish to speak with a qualified professional before acting on anything here.