Top Strategies to Refinance & Access Equity for Renovations

Refinancing to access equity gives you the ability to use the wealth built up in your McKinnon home to fund renovations without selling or taking out a separate personal loan.

If your property has increased in value since you purchased it, and you've paid down your loan, that accumulated equity can be released through a refinance. Most lenders allow you to borrow up to 80% of your property value without requiring lenders mortgage insurance, which means if your home is now worth more than when you bought it, you may have substantial funds available for a renovation project while also reviewing your current loan structure for potential improvements.

How Equity Release Through Refinancing Works

You access equity by increasing your loan amount when you refinance, with the additional funds paid directly to you at settlement. Consider a McKinnon homeowner who purchased a property several years ago with an outstanding loan of $450,000 and a current property value of $950,000. At 80% lending, they could borrow up to $760,000, which means they have access to $310,000 in usable equity after repaying their existing loan. If they need $120,000 for a kitchen and bathroom renovation, they refinance to a new loan of $570,000, receive the $120,000 at settlement, and the remainder pays out their original mortgage.

The difference between this approach and a personal loan is substantial. Personal loan rates typically sit several percentage points higher than mortgage rates, and renovation loans are repaid over much shorter terms. By consolidating the renovation cost into your mortgage, you spread the repayment over the life of the loan, which reduces the immediate impact on your cashflow and keeps all your borrowing under one facility.

Why McKinnon Properties Often Have Strong Equity Positions

McKinnon's proximity to quality schools like McKinnon Primary and McKinnon Secondary College, along with direct train access to the CBD via the Frankston line, has driven consistent property value growth in the area. Homes on larger blocks, particularly those around the Jasper Road and Centre Road precincts, have seen substantial appreciation as families look for established homes with renovation potential in well-connected suburbs.

Many McKinnon homeowners who purchased five or more years ago are now sitting on significant equity, even if they haven't made extra repayments. That capital growth, combined with regular loan repayments, creates the borrowing capacity needed to fund substantial renovations without needing to move or access other savings. For families looking to add a second storey, reconfigure floor plans, or modernise older interiors, releasing equity through refinancing offers a structured way forward.

What Lenders Assess When You Refinance for Equity Access

Lenders base their approval on your current property value, outstanding loan balance, income, and overall financial position. They'll order a property valuation to confirm what your home is worth today, and that valuation determines how much you can borrow. If the valuer's assessment comes in lower than expected, your available equity reduces accordingly, so it's worth understanding the local market before you apply.

Your income and existing commitments also play a role. Even though you're not purchasing a new property, lenders still assess whether you can service the higher loan amount. If your income has increased since your original loan was approved, or you've paid down other debts, you may find your borrowing capacity has improved. In some cases, switching to a lender with more flexible serviceability criteria opens up additional equity that your current lender wouldn't release.

Refinancing for Renovations vs Refinancing for Rate

While accessing equity is the primary goal, refinancing also gives you the opportunity to review your interest rate and loan features. If you've been on the same loan for several years, particularly if you're coming off a fixed rate, you may be paying more than necessary. At current variable rates, even a small reduction in your interest rate can offset a portion of the additional repayment created by the higher loan amount.

It's worth running the numbers before assuming that accessing equity will dramatically increase your repayments. If your original loan was at a higher rate and you refinance to a lower one, the interest savings can absorb some or all of the extra cost of borrowing the renovation funds. That's where a loan health check becomes valuable, as it compares your current loan against what's available now, including rate, offset accounts, redraw facilities, and repayment flexibility.

Timing Your Refinance Around Renovation Plans

You don't need to have builder quotes finalised before applying to refinance, but you do need a realistic estimate of how much you'll need. Lenders release the equity funds at settlement, and once the refinance is complete, you're free to spend those funds as planned. Some homeowners prefer to have their renovation fully scoped before refinancing so they know exactly how much to access, while others take a buffer to allow for cost variations during construction.

If you're planning a staged renovation, consider whether you'll need all the funds upfront or whether accessing a portion now and refinancing again later makes more sense. Each refinance has associated costs, including valuation fees, application fees, and potential discharge fees from your current lender, so consolidating your borrowing into one refinance is usually more cost-effective than splitting it across multiple applications.

Loan Features That Support Renovation Projects

Once you refinance, the loan structure you choose affects how you manage the renovation spend and your repayments going forward. An offset account lets you park any unused renovation funds and reduce the interest charged on your loan until you need to pay builders and suppliers. Redraw facilities offer similar flexibility, though some lenders place restrictions on how often you can access redrawn funds.

If you're renovating to improve your property value before selling or renting, having flexible repayment options during the construction period can help manage cashflow. Some lenders allow interest-only repayments for a set period, which reduces your minimum repayment while the work is underway, though you'll need to demonstrate that this approach aligns with your broader financial strategy.

How Much Equity Should You Leave in the Property

While you can borrow up to 80% of your property value without lenders mortgage insurance, that doesn't mean you should always borrow to the maximum. Leaving a buffer protects you if property values shift or if you need to access additional funds later for other purposes. It also means your loan-to-value ratio remains comfortable, which keeps more refinancing options open in the future.

Consider a scenario where a homeowner refinances to 80% to fund a renovation, then decides two years later they want to upgrade to a larger property. If property values have remained flat and they've only made minimum repayments, they may not have enough equity to fund a deposit on the next purchase without selling first. Borrowing to 75% instead of 80% leaves room for future flexibility, though it does mean accessing slightly less now.

Call one of our team or book an appointment at a time that works for you to discuss how refinancing can unlock the equity in your McKinnon home while ensuring your loan structure supports your renovation and long-term financial goals.

Frequently Asked Questions