Your home equity is the difference between what your property is worth and what you owe on it.
If you bought in Burns Beach three years ago, you've likely seen solid capital growth. That growth creates usable equity that you can access through a refinance to purchase another property without needing to save a fresh deposit from scratch. Rather than waiting years to accumulate cash savings, you can borrow against the value sitting in your current home and use it as a deposit for a second purchase.
How Much Equity Can You Actually Use?
Most lenders will let you borrow up to 80% of your property value without requiring mortgage insurance. If your Burns Beach home is valued at $800,000 and you owe $500,000, you have $300,000 in equity. At an 80% loan to value ratio, you can borrow up to $640,000 total, which means you could access $140,000 in usable equity.
That calculation assumes you want to avoid lenders mortgage insurance. If you're willing to go above 80%, you can access more, but the insurance premium gets added to your loan amount and increases your monthly repayments. In our experience, most people prefer to stay at or below that 80% threshold to keep costs down.
Consider someone who bought a townhouse near Burns Beach Park for $650,000 a few years back. They've paid the loan down to $480,000, and the property is now worth $750,000. That's $270,000 in equity. At 80% LVR, they can borrow up to $600,000, meaning they can extract $120,000. That becomes a 20% deposit on a $600,000 investment property, covering deposit and purchase costs without touching their savings.
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Refinancing to Release Equity for Investment
When you refinance to release equity for an investment purchase, you're essentially increasing your loan amount on your existing property. The lender will revalue your home, assess your borrowing capacity based on both your current income and the rental income from the new property, and determine how much additional borrowing they'll approve.
You'll need to demonstrate that you can service both loans comfortably. Lenders typically assess rental income at 80% of the actual rent to account for vacancy and maintenance costs. If the property you're buying will rent for $600 per week, they'll only count $480 per week in your serviceability calculations.
The approval process involves a full credit assessment, property valuation, and income verification. If you're self-employed or have changed jobs recently, expect the lender to scrutinise your income documentation closely. For investment purposes, they'll also want to see that the property you're purchasing stacks up as a viable investment based on location, condition, and rental yield.
Burns Beach Property Values and Equity Growth
Burns Beach has seen consistent property value growth over recent years, driven by the coastal location, proximity to the beach, and appeal to families looking for space and lifestyle. If you bought before the recent development phase along Burns Beach Road, you've likely accumulated substantial equity.
The mix of townhouses, villas, and larger family homes means equity positions vary widely. A four-bedroom house near the foreshore might be sitting on significantly more equity than a two-bedroom villa further inland, but both could have enough to fund a deposit on an investment property in another suburb.
Location matters when you're looking to access equity. Lenders prefer properties in established suburbs with strong sales history. Burns Beach ticks those boxes, which means valuations tend to come through without issues, and lenders are comfortable with higher LVRs in this area compared to more remote or less proven locations.
Using Equity for Debt Consolidation Alongside Property Purchase
Some people refinance to pull out equity for a property deposit and simultaneously consolidate other debts like car loans or credit cards. This can make sense if those debts carry higher interest rates than your home loan, but it increases your overall mortgage balance and extends the repayment period on what might have been short-term debts.
If you owe $20,000 on a car loan at 8% and $15,000 across two credit cards at 18%, rolling those into a refinance at a lower rate saves on interest. But stretching that $35,000 over 30 years means you'll pay more in total interest than if you'd cleared those debts in their original timeframes. It's worth running the numbers with someone who can model out both scenarios before committing.
Debt consolidation can improve your borrowing capacity in the short term by reducing your minimum monthly repayments, which makes it easier to get approved for the investment loan. Just make sure you're not using the refinance as a way to avoid addressing spending patterns that created the debt in the first place.
What Happens to Your Repayments When You Extract Equity
When you increase your loan amount to pull out equity, your repayments go up. If you're borrowing an extra $120,000, your monthly repayment might increase by $700 to $900 depending on the rate and loan term. That's on top of the new loan you're taking out for the investment property.
You need to factor in both repayment increases before committing. Rental income from the investment should cover most or all of the new investment loan repayments, but the increased repayment on your existing home loan comes out of your own cashflow. If you're already stretched, that can create pressure.
A loan health check before you refinance helps identify whether your current rate is still competitive. If you're on a higher rate than what's available now, refinancing to access equity might also drop your interest rate, which can offset some of the repayment increase from the higher loan balance.
Call one of our team or book an appointment at a time that works for you.
If you're ready to explore how much equity you can access and whether your current property can support a second purchase, reach out to Shoreside Finance. We'll run through the numbers, assess your borrowing capacity across both loans, and connect you with lenders who are comfortable with investment lending in your situation. Call us directly or book an appointment online to get started.
Frequently Asked Questions
How much equity can I use from my Burns Beach home to buy another property?
Most lenders allow you to borrow up to 80% of your property value without mortgage insurance. If your home is worth $800,000 and you owe $500,000, you can borrow up to $640,000 total, giving you access to $140,000 in usable equity for a deposit.
Will my repayments increase when I refinance to release equity?
Yes, increasing your loan amount to extract equity will raise your repayments on your existing home loan. For example, borrowing an extra $120,000 might add $700 to $900 per month depending on your rate and loan term.
Can I use equity to buy an investment property and consolidate debts at the same time?
You can refinance to access equity for both purposes, which may lower your interest costs on high-rate debts like credit cards. However, this increases your mortgage balance and extends repayment terms, so it's important to compare total interest costs before proceeding.
Do lenders count rental income when assessing my borrowing capacity for an investment property?
Lenders typically assess rental income at 80% of the actual rent to account for vacancies and maintenance. If your investment property will rent for $600 per week, they'll count $480 per week in your serviceability calculations.
What is the loan to value ratio and why does it matter when accessing equity?
The loan to value ratio (LVR) is the percentage of your property value that you're borrowing. Staying at or below 80% LVR lets you avoid lenders mortgage insurance, which reduces costs and keeps your repayments lower.
