Do you know how to access equity for investment?

Refinancing to access equity for investment means converting part of the value in your existing property into borrowing capacity for a deposit on your next purchase.

If you own a home in Templestowe and its value has grown since you bought it, you may have usable equity sitting in that property. Rather than saving for years or selling to move forward, refinancing lets you borrow against that equity and use the funds as a deposit on an investment property. The mechanics involve increasing your loan amount on your existing home, with the extra funds released at settlement and directed toward your next purchase.

How Lenders Calculate Usable Equity

Lenders typically allow you to borrow up to 80% of your property's current value without incurring lenders mortgage insurance.

If your Templestowe home is valued at the suburb's current median and you owe $800,000 on your existing loan, the calculation looks like this: 80% of your property's value, minus the amount you still owe, equals your usable equity. In this scenario, that leaves approximately $480,000 in accessible equity before LMI applies. If you're prepared to pay LMI, some lenders will allow you to borrow up to 90% or higher, which increases the equity available but adds a one-off premium to your loan costs.

The calculation changes depending on your property's location and type. Templestowe's established housing stock and proximity to the Eastern Freeway and Westfield Doncaster have supported consistent valuations, which gives lenders confidence when assessing equity release applications. Lower Templestowe's riverfront character and larger block sizes also tend to hold appeal in valuation assessments.

Refinancing Application Requirements for Equity Release

The application process involves a formal property valuation, updated income verification, and a serviceability assessment that includes both your existing and proposed loans.

Lenders will order a desktop or physical valuation of your Templestowe property to confirm its current market value. They'll also assess whether you can service the increased loan amount on your existing home, plus the new investment loan you're applying for. This means providing recent payslips, tax returns if you're self-employed, and a rental appraisal for the property you intend to purchase. Your borrowing capacity will depend on your income, existing debts, living expenses, and the rental income the investment property is expected to generate. Most lenders apply a discount to that rental income, typically assessing only 80% of the projected rent when calculating serviceability.

Consider a Templestowe homeowner refinancing to access equity for a unit purchase in Bundoora, where the median unit sits around $520,000. With $480,000 in usable equity, they could cover a 20% deposit of $104,000, pay stamp duty of approximately $27,000, and cover settlement costs, leaving a buffer for any repairs or initial holding costs. The lender would assess serviceability based on their current income, the increased repayments on the Templestowe home, and the new loan on the Bundoora unit, factoring in rental income of around $530 per week at 80% weighting.

Structuring Loans to Separate Debt Purposes

Separating your owner-occupied and investment debt into distinct loan splits preserves the tax deductibility of your investment borrowing.

When you refinance to release equity, it's important to keep the debt used for investment purposes quarantined from your owner-occupied borrowing. This usually means setting up a split loan structure: one portion remains tied to your Templestowe home, while the equity drawdown is held in a separate split or loan account that funds the investment deposit. The interest on the investment split is tax deductible, while the interest on your owner-occupied portion is not. Mixing the two prevents you from claiming the deduction cleanly and can create complications at tax time.

This structure also allows you to choose different interest rate types for each loan split. You might keep your Templestowe home on a variable rate with an offset account to manage cash flow, while fixing the investment split to lock in your deductible interest cost. Setting this up correctly at the outset avoids the need for expensive debt restructuring later, and a broker familiar with expanding your property portfolio can model the split structure before you proceed.

Offset Accounts and Investment Loan Tax Treatment

Attaching an offset account to your investment loan split can reduce the interest you pay, but it also reduces your tax deduction by the same amount.

If you hold surplus cash in an offset account linked to your investment loan, you'll pay less interest because the offset balance reduces the principal on which interest is calculated. That sounds helpful, but it also means you're claiming a smaller deduction on your tax return. In many cases, it's more tax-effective to offset against your owner-occupied debt, where the interest isn't deductible, and let your investment loan run in full so you claim the maximum deduction. The exception is when cash flow is tight and you need to minimise your total repayments in the short term, in which case offsetting against the investment split makes sense despite the reduced deduction.

Templestowe homeowners often hold meaningful equity but may also carry other debts, such as car loans or personal loans. Consolidating non-deductible debt into your owner-occupied split during a refinance can reduce your overall interest cost and simplify repayments, but adding that debt to your investment split would compromise your ability to claim the interest as a deduction. Your loan structure should reflect the tax treatment of each debt type.

When Equity Release Timing Affects Settlement

You need your equity funds available before settlement on the investment property, which means your refinance must settle first or be coordinated with your purchase contract.

If you've found an investment property and signed a contract with a 60-day settlement, your refinance needs to be completed and funds accessible within that window. Processing times for refinance applications that involve equity release typically run four to six weeks, depending on the lender's valuation turnaround and credit assessment workload. If you're purchasing at auction or in a competitive market where vendors expect short settlement periods, you may need pre-approval for the equity release before you begin your property search. Some buyers arrange a refinance pre-approval with funds held in redraw or offset, ready to deploy when the right investment opportunity appears.

A Templestowe homeowner purchasing an investment property in nearby Bulleen, where the median unit is around $880,000, would need to coordinate their refinance settlement to ensure funds are available for a deposit of approximately $176,000 plus costs. If the refinance settles late, they risk breaching the purchase contract. If it settles too early and they don't proceed with a purchase immediately, they're paying interest on drawn funds that aren't yet working for them. Timing the refinance to align with your purchase contract, or structuring it so funds are accessible but not drawn until needed, requires careful coordination between your broker, solicitor, and lender.

Interest Rate Considerations When Refinancing for Equity

Refinancing to access equity doesn't always mean securing a lower rate, especially if your current loan has features or terms that newer products don't match.

Many Templestowe homeowners refinance primarily to access equity rather than to chase a lower rate, and that's a valid strategy if the equity release enables an investment purchase that delivers rental income and long-term capital growth. That said, if you're refinancing anyway, it makes sense to assess whether a better rate is available on both your existing and new borrowing. Your current lender may offer an equity increase on your existing loan without requiring a full refinance, but their rate may not be competitive. Moving to a new lender gives you the opportunity to secure a lower rate on your entire debt, not just the equity portion, which can offset some of the additional interest cost from the increased borrowing.

Fixed rates that have recently expired often roll to higher variable rates, and if your Templestowe home loan is in that position, refinancing to access equity while also coming off a fixed rate can address both goals in a single application. Comparing refinance options across multiple lenders, rather than defaulting to your current bank, typically results in a lower blended rate and potentially stronger loan features such as offset accounts, redraw flexibility, or lower ongoing fees.

Serviceability Buffers and Multi-Property Lending

Lenders apply a serviceability buffer to your proposed repayments, typically assessing your ability to service the loan at a rate 3% higher than the actual rate.

This buffer is designed to ensure you can still meet repayments if interest rates rise, but it also means you may not be able to borrow as much as the equity calculation suggests. If your income is strong and your existing debts are low, the buffer is less likely to constrain your borrowing. If you're carrying other commitments such as investment loans, car finance, or credit card limits, the buffer can reduce your borrowing capacity significantly. Lenders will also apply different serviceability treatment depending on whether you're salaried, self-employed, or earning income through a trust or company structure. Loans for self-employed borrowers often require two years of tax returns, while salaried employees may only need recent payslips and a letter from their employer.

Templestowe's median household income sits above the Melbourne average, and many residents work in professional or managerial roles, which generally supports stronger serviceability outcomes. However, if you're planning to build a portfolio of multiple investment properties, your second or third purchase will be assessed more conservatively than your first, as lenders factor in the cumulative risk of holding several mortgages. Working with a mortgage broker in Templestowe who understands multi-property lending allows you to structure your refinance and investment loans in a way that preserves your borrowing capacity for future purchases, rather than exhausting it on your first equity release.

Call one of our team or book an appointment at a time that works for you to discuss how refinancing to access equity could support your next investment, and how to structure your loans to protect both your cash flow and your long-term borrowing capacity.

Frequently Asked Questions