Why Should Bundoora Homeowners Consider Equity Release?

Property equity sits quietly in the background of homeownership until something changes and you need to put it to work.

For homeowners in Bundoora, where the median property value sits around $880,000 to $905,000, many are sitting on substantial equity positions without a clear understanding of how to access it or what it might cost. Refinancing to release equity allows you to borrow against the value your property has accumulated, converting that paper wealth into usable funds for renovations, investment purchases, debt consolidation, or business capital. The decision to tap into that equity should be informed by your loan to value ratio, your capacity to service the increased loan amount, and the specific purpose driving the refinance.

What Does Releasing Equity Actually Mean?

Releasing equity means increasing your home loan balance to access the difference between what you owe and what your property is worth. Lenders typically allow borrowing up to 80% of your property value without requiring lenders mortgage insurance, though some will lend higher with additional costs. In Bundoora, a homeowner with a property valued at $900,000 and an outstanding loan of $450,000 has $450,000 in equity, with $270,000 of that accessible at an 80% loan to value ratio. The refinance process involves a formal valuation, serviceability assessment, and settlement into a new loan structure that reflects the higher borrowing amount.

How Bundoora's Property Market Affects Equity Positions

Bundoora's property values have remained relatively stable, with CoreLogic recording 331 house sales and 176 unit sales in the 12 months to June 2026. The suburb's proximity to La Trobe University and RMIT's Bundoora campus drives consistent rental demand, reflected in a unit yield of 5.10% and median unit rent of $530 per week. This stability matters when refinancing to release equity because lenders base their valuation on recent comparable sales, and a suburb with steady transaction volumes and low volatility presents less risk than one with thin sales data or sharp price swings. Homeowners who purchased in Bundoora five to seven years ago are likely sitting on meaningful equity gains, even without the dramatic growth seen in some inner-city pockets.

Using Equity for Renovation vs Investment Property

The purpose behind your equity release shapes both the loan structure and the financial outcome. Consider a homeowner refinancing to access $150,000 in equity for a renovation that adds a second living area and updates the kitchen. That renovation may add $180,000 to $220,000 in property value if executed well, creating a net wealth gain and improving liveability. The same homeowner accessing $150,000 to purchase an investment property in a nearby suburb with strong rental yield could generate $450 to $550 per week in rental income, depending on the property type and location. The investment property scenario introduces ongoing holding costs, tax deductions, and long-term capital growth potential that a renovation does not. Your refinancing strategy should align with whether you're prioritising lifestyle improvement, income generation, or portfolio expansion.

Loan to Value Ratio and How It Limits Borrowing

Lenders calculate your available equity by multiplying your property value by their maximum loan to value ratio, then subtracting your current loan balance. At 80% LVR, a Bundoora property valued at $900,000 allows total borrowing of $720,000. If your current loan is $450,000, you can access up to $270,000 in additional funds without incurring lenders mortgage insurance. Borrowing above 80% LVR is possible but adds thousands in LMI premiums that erode the usable equity. A homeowner pushing to 90% LVR on the same property could borrow $810,000 total, releasing $360,000, but the LMI cost on a loan of that size might reach $15,000 to $25,000 depending on the lender and your circumstances. That cost is capitalised into the loan, further reducing the net funds available for your intended purpose.

Serviceability and the Income Test

Accessing equity is not just about property value. Lenders assess whether you can service the higher loan amount at current variable rates, typically adding a serviceability buffer of 3% above the actual rate. A Bundoora household increasing their loan from $450,000 to $650,000 will see monthly repayments rise by approximately $1,400 to $1,600 depending on the rate and loan term. If your income is primarily PAYG employment with stable tenure, serviceability is straightforward. If you're self-employed, work casually, or rely on rental income from an existing investment property, lenders apply different assessment methods that can reduce your borrowing capacity by 20% to 30% compared to a salaried borrower with equivalent income. We regularly see clients with strong equity positions unable to access the full amount they expected because their income structure or existing debt commitments constrain what lenders will approve.

Debt Consolidation Through Equity Release

Refinancing to consolidate personal loans, car finance, or credit card debt is one of the most common uses of released equity. A Bundoora homeowner carrying $40,000 in personal debt at 9% to 14% interest and $25,000 in credit card balances at 18% to 22% might access $65,000 in equity to clear those commitments entirely. The consolidated debt is then repaid at the home loan rate, reducing monthly commitments and simplifying cash flow. The longer loan term spreads the repayment over 25 or 30 years rather than the three to five years typical of personal loans, which lowers the monthly cost but increases the total interest paid over time. This approach works when the freed-up cash flow is redirected toward savings, additional repayments, or income-generating activities rather than accumulating new consumer debt. Lenders scrutinise debt consolidation refinances closely, as patterns of repeated consolidation without behavioural change can signal financial stress.

Tax Implications When Using Equity for Investment

The purpose for which you use released equity determines its tax treatment. Funds used to purchase an investment property, including the deposit, purchase costs, and initial repairs, create tax-deductible interest. Funds used for personal purposes such as renovating your own home, purchasing a car, or taking a holiday generate non-deductible interest. If you access $200,000 in equity and use $150,000 for an investment purchase and $50,000 for a home renovation, only the interest attributable to the $150,000 investment portion is deductible. Keeping separate loan splits for deductible and non-deductible purposes simplifies record-keeping and ensures you maximise your annual tax return without overclaiming. This distinction becomes particularly important for clients considering expanding your property portfolio, where maintaining clear separation between investment and personal borrowing supports long-term tax efficiency.

Costs Involved in Refinancing to Release Equity

Refinancing involves valuation fees, application fees, discharge fees from your current lender, settlement costs, and potentially legal fees depending on the loan structure. A typical refinance to release equity in Bundoora might incur $600 to $1,000 for a bank valuation, $300 to $600 in discharge fees, $0 to $800 in application fees depending on the lender, and $300 to $500 in settlement costs. Some lenders offer fee rebates or waivers when refinancing above certain loan amounts, which can offset part of the cost. If you're breaking a fixed rate to refinance, break costs can reach $5,000 to $20,000 depending on how much time remains on the fixed term and the difference between your fixed rate and current wholesale rates. These costs should be factored into your decision, as they reduce the net equity you can access and extend the time required for the refinance to deliver a financial benefit.

When Equity Release Doesn't Make Sense

Not every equity position should be accessed. If your current loan rate is significantly lower than prevailing market rates, refinancing to release equity might cost you more in additional interest over the loan term than the benefit the funds deliver. A homeowner on a fixed rate of 2.5% with two years remaining would likely pay substantial break costs and then refinance onto a variable rate 3% to 4% higher, increasing both their loan balance and their ongoing repayments. If the purpose for accessing equity is discretionary rather than wealth-building or essential, the long-term cost may outweigh the short-term benefit. We work through these scenarios with clients to determine whether the refinance serves their broader financial goals or simply converts equity into consumption without a corresponding return.

Call one of our team or book an appointment at a time that works for you. We'll assess your equity position, run serviceability scenarios, and structure a refinancing to release equity solution tailored to your goals.

Frequently Asked Questions