What Is a Cash-Out Refinance?
A cash-out refinance is when you refinance your existing home loan for a larger amount than you currently owe — and take the difference as cash. The additional funds come from the equity you've built up in your property through repayments and price growth. The cash can be used for almost any purpose: renovations, investment property deposit, vehicle purchase, debt consolidation, or business expenses.
Because the funds are secured against your home, the interest rate is significantly lower than a personal loan or credit card — typically 6–8% vs 12–20% for unsecured debt.
Lenders look carefully at the purpose of a cash-out refinance. Renovations, investment deposits and debt consolidation are straightforward. Business purposes, crypto purchases and gifting to family members get more scrutiny. Knowing how to present your purpose correctly — and choosing a lender whose policy aligns with it — can be the difference between approval and decline.
How Much Equity Can You Access?
Most lenders will allow you to borrow up to 80% of your property's current value — without paying LMI. The usable equity is calculated as:
- Property value: $1,500,000
- 80% of value: $1,200,000
- Less existing mortgage: $650,000
- Usable equity (no LMI): $550,000
You don't have to draw all of it. Most borrowers set up an equity loan facility and draw only what they need — paying interest only on drawn funds. This is particularly useful for staged renovation projects or rolling investment deposits.
Worked Example: Sydney Renovation via Cash-Out
- Home value (2026): $1,800,000
- Existing mortgage: $700,000
- Usable equity (to 80%): $740,000
- Cash drawn for renovation: $200,000
- New total loan: $900,000 (50% LVR)
- Interest on $200K at 6.49%: ~$1,082/month (IO)
- Personal loan alternative (12%, 5yr): ~$4,448/month
- Monthly saving vs personal loan: ~$3,366/month
The renovation also adds value to the property — meaning the equity drawn is partially offset by the increased asset value on completion.
Common Uses for Cash-Out Refinancing in Sydney
Home Renovations
The most common use. Kitchen and bathroom renovations typically return 70–90 cents per dollar spent in added value. A $150,000 renovation on a $1.5M Sydney home is often recovered entirely at next sale. Accessing equity at home loan rates to fund it is far cheaper than a construction loan or personal loan.
Investment Property Deposit
Using home equity as the deposit on an investment property is a widely-used strategy. The equity loan interest is deductible (the funds are used for investment purposes), meaning the ATO effectively subsidises part of your interest cost. We structure the equity loan as a separate facility to keep the tax records clean.
Debt Consolidation
Rolling car loans, personal loans and credit card debt into your home loan reduces your total monthly outgoings. A $50,000 debt at 18% credit card rate costs ~$1,500/month over 4 years. At home loan rates, the same amount costs ~$270/month IO. The discipline required: don't run the credit card back up.
Vehicle or Asset Purchase
Boat, caravan, investment in a business — assets that don't qualify for standard home loan purposes can sometimes still be funded via cash-out, depending on lender policy and how the purpose is framed. We navigate lender policies to find the right fit.
Cash-Out vs Home Equity Loan vs Line of Credit
- Cash-out refinance: Replace existing loan with larger loan; receive difference as lump sum or drawn facility. Best for larger amounts or rate improvement alongside equity access.
- Home equity loan (split loan): Add a separate loan on top of existing loan without refinancing the primary loan. Best when your existing rate is good and you don't want to disturb it.
- Line of credit: Revolving facility secured by property. Draw and repay as needed. Best for ongoing or uncertain spend (e.g. staged renovations, business cash flow).
We recommend the right structure based on your purpose, existing loan rate, and total cost of funds.