Cash out refinance: how much equity could you access?
A cash out refinance replaces your current home loan with a larger one. The difference lands in your account as cash, drawn from your home equity. Most lenders cap the new loan at 80% of your property value, so the maths is property value × 0.8 minus your current balance.
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How it works
Cash-out refinance versus your other options
Three different mechanisms let you access funds from your home. Each suits a different situation. The critical difference: cash-out refinance opens the full lender market, while redraw and top-up keep you with your current lender.
Cash-out refinance
Full market accessApply for a new home loan larger than your current balance. At settlement, the new lender pays out your old loan and deposits the surplus into your nominated account. You can move to any lender whose policies fit your purpose and income structure. That matching is where approvals are won or lost.
Redraw facility
Same lender onlyWithdraw extra repayments you have already made, but only up to the amount you have overpaid. Does not increase your loan beyond the original amount. If you have not overpaid, there is nothing to redraw. No application, no switching costs, but no extra borrowing either.
Loan top-up
Same lender, simpler paperworkYour current lender increases your loan without switching. Simpler than a full refinance, but you are limited to one lender's rates and policies. If your existing lender does not lend for your purpose or sits above market on rate, you are stuck.
If switching lenders does not appeal, redraw or top-up may suit your situation. See how to access equity without refinancing or compare refinancing versus a loan top-up.
Common reasons to refinance and cash out
The purpose you declare at application directly affects which lenders will approve you. Not all lenders treat all purposes equally. Here are the four most common reasons borrowers access equity, ranked by lender acceptance.
Renovating the family home
The most widely accepted purpose across lenders, because renovations increase the security value. If renovation is your sole goal, compare this path against dedicated renovation loans, which may offer staged drawdowns that better suit a building timeline.
Funding an investment property deposit
Second most common purpose. The loan must be split into owner-occupier and investment portions at origination. The ATO's position is that interest deductibility follows the purpose of the borrowing, not the security. Get the split wrong and you lose tax deductions on the investment portion permanently.
Consolidating high-interest debt
Common but lender-sensitive. Some lenders restrict or outright decline cash-out for debt consolidation. Others cap the amount or require evidence the debts being consolidated will be closed at settlement. The difference between approval and decline often comes down to which lender you apply to.
Major personal expenses
School fees, medical costs, or a capital injection into your business. This category has the most variation across lenders. Business injection faces the tightest scrutiny. Declare the purpose honestly. Lenders verify, and a misrepresented purpose can void the loan contract.
Eligibility
Will you qualify for a cash-out refinance?
Three gates stand between you and approval. Fail any one and the application stops. Knowing the barriers upfront is better than discovering them six weeks into an application.
Equity: at least 20% retained
80% LVR capLenders require you to retain at least 20% equity after the cash-out, meaning an 80% LVR maximum. Some allow 85% or 90% with Lenders Mortgage Insurance, but LMI adds thousands. LMI is also not transferable: if you paid it on your original loan and the new LVR exceeds 80%, you pay it again.
Purpose: must match lender appetite
Lender-specificYour declared purpose must be acceptable to the lender you apply to. Renovation is widely accepted; debt consolidation and business injection face the tightest scrutiny. This is why lender-purpose matching is the difference between approval and decline.
Serviceability: APRA's 3% buffer
Most common blockerAPRA requires lenders to assess your ability to repay at the loan rate plus a minimum 3 percentage point buffer (APG 223). If your cash-out rate is 6.5%, you are tested at 9.5% or higher. For borrowers who locked in 2% fixed rates during 2020 to 2022, the gap between current repayments and the stress-test rate is wider than ever, and the new larger balance makes it wider still.
Self-employed borrowers face additional income-verification complexity. Knowing which lender to approach for your income structure is the difference between approval and a wasted application. Use the borrowing capacity calculator to stress-test your position before speaking to anyone.
Cash-out refinance: a worked example
Abstract numbers create abstract anxiety. Here is a specific scenario with real costs so you can see exactly what a cash-out refinance looks like in practice.
Property value: $1.25M. Current loan: $500K. New loan: $720K at 80% LVR. Cash out: $220K. Purpose: renovation.
01
The equity calculation
$1.25M × 0.8 = $1M maximum loan at 80% LVR. Minus the $500K existing balance leaves $500K maximum cash-out available. This borrower chooses $220K for a renovation, bringing the new loan to $720K. The remaining $280K in accessible equity stays untouched, keeping the LVR at 57.6%, well below the 80% threshold.
02
The new repayment
At an indicative cash-out rate of 6.2% over 25 years (keeping the original remaining term, not resetting to 30), the new monthly repayment is approximately $4,720. The old repayment on the $500K loan at the same rate was approximately $3,280. That is roughly $1,440 more per month. Reset to 30 years instead and the monthly drops to about $4,410, but total interest over the life of the loan increases by approximately $68,000.
03
The switching costs
Discharge fee from current lender: $350. Valuation fee: $400. Settlement and legal costs: $800. Government registration fee: $200. New lender application fee: $0 to $600. Total: approximately $1,750 to $2,350. No LMI in this scenario because the LVR is 57.6%.
04
The break-even
Total switching costs of approximately $2,000 represent less than 1% of the $220K cash-out amount. If the renovation adds $150K or more in property value (a reasonable expectation for a $220K renovation on a $1.25M Sydney property), the return is clear. If the new rate is also lower than your current rate, the monthly savings on the original $500K portion offset the switching costs within months.
Want to see your numbers, not these?
Book a free 15-minute equity feasibility chat. A Stryve broker calculates your accessible equity, stress-tests your serviceability at current rates, and identifies which lenders suit your cash-out purpose.
Book your equity feasibility chatWhy cash-out approvals depend on lender matching
The most common reason cash-out applications fail is not insufficient equity. It is applying to the wrong lender for your specific purpose. Lender policies on acceptable purposes, LVR caps, and income verification vary significantly across the market.
Purpose matching across 40+ lenders
One lender declines cash-out for debt consolidation. Another caps it at $100K. A third approves it but requires all debts closed at settlement. Stryve matches your declared purpose to the lender most likely to approve, rather than forcing your scenario into one lender's policy framework.
Self-employed income assessment
Some lenders on the panel accept one year of tax returns instead of two. Others use add-back calculations that recognise depreciation as income. Knowing which lender to approach for your income structure is the broker's job, and Stryve specialises in self-employed applicants.
Loan structuring for tax treatment
If the cash-out funds an investment property deposit, the loan must be split into owner-occupier and investment portions at origination. Stryve structures the split so the ATO's purpose-based deductibility rules work in your favour from day one. A misstructured loan can cost thousands in lost deductions over its life.
Commission transparency
Our commission comes from the lender once your loan settles, not from you. The recommendation is based on your purpose, eligibility, and rate, not the lender's commission rate. We will show you exactly how we are paid before you proceed.
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Cash-out refinance: common questions
Find out how much equity you could access
A 15-minute call with a Stryve broker covers your equity position, stress-tests your serviceability at current rates, and identifies which lenders suit your cash-out purpose. No surprises, no pressure.