Everything to Know: Refinance and Access Equity in Randwick

If you own a home in Randwick, you may be able to refinance and use some of its equity as the deposit on an investment property. It works when the numbers hold up for your income, your existing loan and the new debt you take on.

Many people around the Prince of Wales Hospital, the Royal Hospital for Women and Sydney Children's Hospital have worked hard, paid down a mortgage and wondered whether the home could do more. This article walks through how that works, what it costs and when it is worth a conversation.

What Does It Mean to Access Equity for Investment?

Equity is the difference between what your home is worth and what you still owe on it. Accessing it means borrowing against that gap, usually through a refinance, so the funds can go towards an investment property purchase.

Lenders do not lend against the full value of your home. They set a limit based on a valuation and their own policy, and that limit varies between lenders and with your circumstances. A property valuation is the starting point, because the lender's figure, not your estimate, decides how much equity is usable.

How the Refinance Process Works Step by Step

The refinance process starts with a review of your current loan, then a valuation, then a new loan application with a lender that suits your plan. Once approved, the new loan pays out the old one and releases the extra funds.

In practice, we look at your current loan amount, your interest rate and your repayments. Then we check your income, expenses and other debts, because the lender will assess whether you can afford the larger loan. You can get a feel for this early with our borrowing capacity page. If you are weighing up a refinance for the first time, our refinancing page explains the basics.

Should You Release Equity as a Separate Loan Split?

In most cases, it makes sense to ask for the released equity to be set up as its own loan split, separate from your home loan. A separate split keeps the investment borrowing clearly apart from your home borrowing, which makes record keeping cleaner.

The trade-off is more moving parts. Each split can have its own repayment type and, in some cases, its own rate, so you need to keep an eye on each one. Tax treatment depends on your situation, so speak to your accountant before you decide how to structure it. Nothing about the tax outcome is certain until they have reviewed your circumstances.

A Randwick Example: Using Equity for a Deposit

Consider a hospital registrar living in Randwick who owns a home with a solid amount of equity. They want to buy an investment unit and need about $100,000 in extra funds for the deposit and costs.

The lender values the home and confirms that enough equity is available. The extra $100,000 is set up as a separate split. At an illustrative rate of 6.75% p.a., interest-only repayments on that split would be about $562 a month. On a principal and interest basis over 30 years at the same rate, they would be about $649 a month.

The registrar's broker also runs the new investment loan alongside this. The lender assesses both loans together, so the registrar's income, the rent expected from the unit and their other commitments all matter. In this scenario, the numbers work and the loan is approved. The registrar picks interest-only on the investment split for a set period, understanding that the balance does not fall during that time and that repayments rise once principal and interest begins. They also keep the home loan on principal and interest.

Interest-Only or Principal and Interest on the Equity Split?

Interest-only keeps repayments lower for a set period, but you do not reduce the debt during that time. Principal and interest costs more each month, though it steadily pays the loan down.

When an interest-only period ends, repayments are recalculated over the shorter remaining term, so they jump. A loan that has an interest-only period of five years on a 30 year term would then be repaid over 25 years. If you choose this route, plan for the higher repayment now rather than when it arrives. An investment loan can be structured either way, depending on your goals and the lender.

What Are the Risks of Borrowing Against Your Home?

The main risk is that your home secures more debt, so if you cannot meet repayments the lender can act against your home. Your total borrowing rises, and so does your exposure if rates go up or rent stops coming in.

A few other costs are worth weighing. Lenders may charge application, valuation or discharge fees, and a fixed loan can carry break costs if you leave early. Property values can also fall, which shrinks your equity. Build a buffer for vacancy, repairs and rate rises before you commit.

Is Your Fixed Rate Ending Soon?

If your fixed rate is about to end, it can be a sensible time to review your loan and look at equity at the same time. When a fixed term expires, your loan usually reverts to the lender's variable rate, so it is worth checking what that will be.

Breaking a fixed loan early can trigger break costs, so timing matters. Our page on fixed rate expiry covers what to check before your term ends. Combining the review with an equity release means you only go through the application once.

Start With a Loan Health Check

A loan health check is a review of your current loan, rate, features and equity before you decide anything. It shows whether a refinance is worthwhile, whether you have usable equity and what the new repayments might look like.

For busy medical professionals working shifts, that is a useful first step because it takes the guesswork out before you spend time on applications. Our loan health check is a good place to start, and you can also use a repayment calculator to test your own numbers.

If you live or work in Randwick and are wondering what your home could do for your next property, call one of our team or book an appointment at a time that works for you. We will go through your loan, your equity and your plans in plain language, with no pressure.

Frequently Asked Questions