Top tips to refinance and access equity for investment

Refinancing to access equity means borrowing more against your current property to fund an investment purchase.

Refinancing to access equity allows you to increase your loan amount based on the value your property has gained since you bought it. The additional funds can be used as a deposit for an investment property, giving you a way to grow wealth without needing to save a full deposit from scratch. For ADF members in South Australia, this approach works well when you have stable equity in your home and can service a larger loan amount.

How equity release works when you refinance

Your lender will arrange a property valuation to confirm your home's current market value. If your home is worth more than you owe, the difference is your equity. Most lenders allow you to borrow up to 80% of the property's value without paying Lenders Mortgage Insurance, though some lenders offer higher ratios for ADF members. The amount you can access depends on how much equity you have and how much you can afford to repay.

Consider an ADF member stationed at Edinburgh who bought a home in Salisbury Downs for $420,000 three years ago. The loan was $380,000 at the time. The property is now valued at $490,000, and the remaining loan balance is $360,000. That gives them $130,000 in equity. If they refinance and borrow up to 80% of the current value, they could access around $32,000 in usable equity after accounting for costs. That amount can cover a deposit and some purchase costs on an investment property in a regional centre like Port Pirie or Whyalla, where entry prices are lower.

What lenders consider when you apply to access equity

Lenders assess your ability to service the increased loan amount. They review your income, existing debts, living expenses, and any other financial commitments. ADF income is generally viewed as stable, which can work in your favour during the assessment. If you have other debts such as car loans or credit cards, those repayments reduce how much you can borrow. Paying down or consolidating debt before applying can improve your borrowing capacity.

Your credit file also plays a role. Late payments, defaults, or multiple credit applications can limit your options. Lenders also consider your employment status and how long you have been in your current role. For ADF members, postings and deployments do not usually count against you as long as your employment is ongoing and your income is consistent.

The cost of refinancing to access equity

Refinancing involves costs that should be factored into your decision. These include discharge fees from your current lender, application fees with the new lender, property valuation fees, and legal or settlement costs. Some lenders offer fee rebates or reduced application fees for ADF members, which can reduce upfront costs. You may also need to pay Lenders Mortgage Insurance if you borrow more than 80% of your property's value, though some lenders waive this for Defence personnel.

These costs can add up to several thousand dollars, so it is worth confirming the total expense before committing. Some borrowers choose to roll these costs into the new loan amount rather than paying them upfront, though this increases the loan balance and the total interest paid over time.

Using equity to fund an investment property deposit

Once you access equity through refinancing, the funds can be used as a deposit for an investment property. Most lenders require a minimum 10% deposit for an investment loan, though a 20% deposit avoids Lenders Mortgage Insurance and gives you access to more competitive rates. The equity you release can also cover stamp duty, legal fees, and other settlement costs.

In South Australia, stamp duty concessions are not available for investment properties, so you need to budget for the full amount. Using equity to cover both the deposit and costs means you do not need to drain your savings or delay the purchase. If you are planning to invest in a suburb with strong rental demand, such as Prospect or Modbury, releasing equity gives you a way to move quickly when the opportunity arises. You can read more about expanding your property portfolio and the broader strategy behind adding a second property.

How to structure your loans after refinancing for equity

When you refinance to access equity, you can keep the funds in the same loan or split them into a separate loan. Splitting the equity portion into its own loan makes it simpler to manage tax deductions if the funds are used for investment purposes. Interest on the investment portion of the loan may be tax deductible, while interest on the portion used for your home is not. Keeping them separate avoids confusion at tax time and gives you clearer records.

Some borrowers also choose an offset account linked to their home loan to manage cash flow between properties. If you are planning to rent out your current home and move into Defence housing, the loan structure may need to change again to reflect the new use of the property. Speaking with a broker who understands ADF circumstances helps you set up the loans correctly from the start. If you need flexibility around repayments, consider reading about interest only loans for ADF members as a way to manage cash flow during the early years of owning an investment property.

When refinancing to access equity makes sense

Refinancing to access equity works when your property has increased in value, your income can support a higher loan amount, and you have a clear plan for the investment. It is less suitable if your equity position is limited, your current loan has a low rate that you would lose by refinancing, or you are still within a fixed rate period with high break costs.

If your fixed rate period is ending soon, refinancing to access equity can be timed to coincide with the expiry, avoiding break costs altogether. You can read more about fixed rate expiry and what to expect when your fixed term ends. If you are unsure whether refinancing makes sense for your situation, a loan health check can clarify whether your current loan is still competitive and whether accessing equity aligns with your financial position.

Documentation you will need to apply

Lenders require proof of income, recent payslips, tax returns if you have additional income, and a list of your assets and liabilities. ADF members may also need to provide a letter confirming ongoing employment. If you receive allowances such as service allowance or rental allowance, some lenders will include these in your income assessment, which can increase your borrowing capacity.

You will also need to provide details about the investment property you plan to purchase, including the expected purchase price and rental income. Lenders use rental income to offset some of the investment loan repayments, though they typically only count 80% of the rent to allow for vacancies and maintenance costs.

If you are ready to explore your options or need clarity on how much equity you can access, call one of our team or book an appointment at a time that works for you.

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