If you own property in Launceston and want to buy an investment, refinancing your home loan can unlock the equity you've built up without needing to sell.
The approach works when your property has increased in value or you've paid down enough of your mortgage to create usable equity. Rather than saving from scratch for your next deposit, you can access this equity through a refinance and use it to fund an investment property purchase. The process involves replacing your current home loan with a new one that releases a portion of your equity as cash, which then becomes your deposit for the investment.
How Equity Release Works When You Refinance
When you refinance to access equity, your lender values your property and calculates how much you can borrow against it. Most lenders will allow you to borrow up to 80% of your property's value without needing to pay lender's mortgage insurance. If your current loan sits below that threshold, the difference between what you owe and what you can borrow becomes available equity.
Consider someone who bought a property in Prospect Vale several years ago. The property has since increased in value, and they've been making regular repayments. Their home is now valued higher than their remaining loan balance. By refinancing, they can increase their loan amount and receive the difference as cash, which they then use as a deposit on a rental property in Mowbray. The new loan covers both their original debt and the equity they've released.
The Connection Between Refinancing and Investment Goals
Refinancing to access equity for investment means you're essentially borrowing against the value you've built in your home. This strategy only works if you have sufficient equity available and your income can support the higher loan amount. Lenders assess your ability to service both your refinanced home loan and the new investment loan you're taking out for the second property.
The refinanced loan on your owner-occupied property will have a higher balance than your previous loan because it now includes the equity you've withdrawn. Your repayments will increase accordingly. At the same time, you'll be taking on a separate investment loan for the property you're purchasing, which will have its own repayments. Lenders evaluate both loans together when determining whether you can afford the arrangement.
What Launceston Property Owners Should Consider
Property values in Launceston have shifted over recent years, particularly in established suburbs close to the CBD like Newstead and South Launceston. Homeowners in these areas may have more equity available than they realise. However, the amount you can release depends on your property's current valuation, not what you think it's worth or what similar properties sold for last year.
A property valuation is part of the refinance process. The lender will arrange this to confirm your property's value before approving the equity release. If the valuation comes in lower than expected, the amount of equity available will be reduced. It's worth understanding the local market conditions before you begin the refinance application, particularly if you're basing your investment plans on a specific equity amount.
Refinancing Costs and How They Affect Your Investment Budget
Refinancing involves costs that reduce the amount of equity you'll have available for your investment deposit. Expect to pay for the property valuation, application fees, and potentially discharge fees from your current lender. Legal fees and settlement costs also apply. These costs typically range from a few hundred to several thousand dollars depending on your lender and the complexity of your situation.
If you're releasing equity to fund an investment, factor these costs into your budget from the outset. Releasing equity doesn't mean you'll receive the full difference between your old loan balance and your new one. The refinancing costs will be deducted, and you'll need to ensure the remaining amount is still sufficient to cover your investment deposit and associated purchase costs like stamp duty and conveyancing fees.
How Your Home Loan Structure Changes
When you refinance to release equity, you're not just increasing your loan amount. You're also choosing a new loan structure, which might include different features than your current mortgage. You might switch from a fixed rate to a variable rate, or vice versa. You could add an offset account or redraw facility if your current loan doesn't have one. You might also adjust your loan term, either extending it to reduce repayments or shortening it to pay off the debt sooner.
These decisions affect how your loan operates and how much interest you'll pay over time. If you're refinancing specifically to release equity for investment, it's worth considering whether your new loan structure supports your broader financial strategy. For example, an offset account linked to your owner-occupied loan can help reduce interest while you build cash reserves for future investment opportunities.
Timing Your Refinance Application
The refinance process takes several weeks from application to settlement. If you're planning to use the released equity to purchase an investment property, you'll need to time the refinance so the funds are available when you need them. You can't access the equity until your refinance settles, which means you'll need the funds ready before making an offer on an investment property or ensure your offer is conditional on finance approval.
In our experience, buyers who apply to refinance and arrange their investment loan at the same time through a single broker have a smoother process. Both loans can be structured together, and the lender can assess your borrowing capacity for the entire arrangement upfront. This approach avoids delays and ensures the equity release aligns with your investment property settlement.
What a Loan Health Check Reveals Before You Refinance
Before refinancing to release equity, a loan health check can show whether your current mortgage is still suitable for your circumstances. It assesses your interest rate, loan features, and repayment structure against what's currently available in the market. If your loan is charging a higher interest rate than comparable products, refinancing might not only release equity but also reduce your ongoing repayments.
This review becomes particularly relevant if your fixed rate period has recently ended and you've rolled onto a higher variable rate. Many Launceston homeowners who fixed their loans several years ago are now paying more than they would on a new loan. If you're already considering refinancing to access equity, switching to a loan with a lower rate at the same time can improve your cashflow and make servicing the higher loan amount more manageable.
Frequently Asked Questions
How much equity can I release when refinancing in Launceston?
Most lenders allow you to borrow up to 80% of your property's value without paying lender's mortgage insurance. The amount of equity you can release is the difference between 80% of your property's current value and what you still owe on your mortgage. A property valuation will determine the exact amount available.
Can I refinance and buy an investment property at the same time?
Yes, you can refinance your home loan to release equity and arrange an investment loan at the same time. Lenders will assess your ability to service both loans together. Working with a broker who structures both loans simultaneously helps ensure the process aligns with your investment property settlement.
What costs should I expect when refinancing to access equity?
Refinancing costs typically include property valuation fees, application fees, discharge fees from your current lender, and legal or settlement costs. These costs usually range from a few hundred to several thousand dollars and will reduce the amount of equity you receive as cash.
Do I need to tell my lender I'm using the equity for an investment?
Yes, lenders need to know how you're using the released equity as it affects their assessment of your application. If you're purchasing an investment property, the lender will assess your ability to service both your refinanced home loan and the new investment loan together.
How long does it take to refinance and access equity in Launceston?
The refinance process typically takes several weeks from application to settlement. You won't be able to access the released equity until your refinance settles, so you'll need to time your application to ensure funds are available when you need them for your investment property purchase.
