Each week, one of the most common questions I get is “Can I refinance if my home has gone up in value?”. Short answer: yes, and it might be one of the best financial moves you make this year. If your property has grown in value since you bought it, you’re sitting on equity you can actually use. You just need to understand how lenders see that growth and what it means for your loan.
Let’s break down how it works, what it can unlock, and where the traps hide.
How Rising Property Value Changes Your Refinance Options
Lenders don’t just look at what you owe. They look at your loan-to-value ratio, or LVR. This is your loan amount measured against your property’s current value, not its purchase price.
Say you bought your Sutherland Shire home a few years ago for $900,000 with a $720,000 loan. That’s an 80% LVR. If your property is now worth $1,050,000, that same $720,000 loan sits at roughly 69% LVR, even if you haven’t paid down a cent extra.
That drop in LVR matters. It can open the door to:
- Lower interest rates, since many lenders reserve their sharpest pricing for borrowers under 80% or even 60-70% LVR in some cases
- The ability to borrow more but still avoid Lenders Mortgage Insurance if you were close to the LMI threshold when you bought
- Access to cash-out refinancing, where you borrow against your new equity for renovations, investment, or other goals
- More flexibility to switch lenders, since a lower LVR makes you a more attractive borrower across the board
What Is Cash-Out Refinancing?
Cash-out refinancing lets you borrow more than your current loan balance and pocket the difference. The extra funds get added to your home loan and repaid over time, usually at a much lower rate than a personal loan or credit card.
People use it for all sorts of things:
- Renovations that lift the property’s value even further
- A deposit for an investment property
- Debt consolidation, rolling higher-interest debts into your mortgage
- Major expenses like education costs or a wedding
Lenders will usually cap how much equity you can access. Most want you to keep at least 10 to 20% equity in the property after the cash-out, and some will ask exactly what the funds are for before approving the increase including potentially requiring evidence of the funds use.
Do You Need a Valuation?
Almost always, yes. Your current lender or a new lender will order a formal valuation to confirm what your property is worth today. You can’t simply tell them the value has gone up and expect them to take your word for it.
A few things worth knowing about valuations:
- They’re often more conservative than what a real estate agent might quote you
- Bank valuers look at comparable sales, condition, and location, not emotional value
- A slightly lower-than-expected valuation can still be enough to unlock a better rate or LMI-free refinance, so it’s worth getting one even if you’re not certain
Fixed vs Variable: Does It Change Anything?
If you’re on a fixed rate, refinancing before the fixed term ends can trigger break costs. These can be significant, so it’s worth calculating whether the savings from refinancing outweigh the exit fees. If you’re on a variable rate, there’s generally no penalty for switching, which makes rising equity even easier to act on.
What About Your Serviceability?
Here’s the catch that trips a lot of people up. A higher property value improves your LVR, but it doesn’t automatically improve your borrowing capacity. Lenders still assess your income, expenses, and existing debts under current serviceability rules, which have tightened over recent years.
So even if your equity has grown substantially, the amount you can borrow depends on what you earn and spend today, not just what your home is worth. This is especially relevant if you’re planning a large cash-out for an investment property purchase.
Steps to Refinance When Your Property Has Increased in Value
- Get a rough idea of your current property value through recent local sales or an online estimate. Ingram Financial can provide you with a free property report to give you an indication of your property’s current worth.
- Check your current loan balance and work out your estimated LVR
- Arrange a formal valuation through us.
- Review your income and expenses to understand your current serviceability
- Compare rates and features across lenders, not just your existing bank
- Factor in any break costs if you’re on a fixed rate
- Apply, with Ingram Financial handling the paperwork and lender comparison for you
Is It Always Worth It?
Not always. If your LVR only moves slightly, or if refinancing costs and break fees outweigh the benefit, it might make more sense to stay put or simply ask your current lender for a better rate. This is where running the numbers properly, rather than assuming a higher valuation automatically means a better deal, really pays off.
Talk to Us Before You Decide
Property values shift, lending rules change, and every borrower’s situation looks a little different. At Ingram Financial, we compare your options across dozens of lenders, order the right valuation, and work out whether refinancing genuinely puts you ahead. No guesswork, no pressure, just a clear answer based on your numbers.
If your property has grown in value and you’re wondering what that means for your mortgage, get in touch. We’ll walk you through exactly what you can access and what it would look like.
Frequently Asked Questions
Yes. What matters is your LVR, the relationship between your loan and your property’s current value, not the raw amount you owe.
It can, depending on the new loan structure. We can help you choose a term that avoids unnecessarily extending your overall repayment period.
Refinancing to a lower interest rate but a longer term can sometimes work out worse overall so it’s important to look at it from all angles.
There’s no set limit, but frequent refinancing can come with costs like valuation fees, discharge fees and mortgage registration fees. It’s usually worth it only when the numbers clearly stack up.
In most cases, yes. Lenders want current, independent confirmation of your property’s value before approving a new loan.
In many cases though, this can be a desktop valuation so you may not need to take time off work to let a valuer into your property.
Need some help?
Not sure where to start? That’s exactly what we’re here for. Drop us a message and we will get back to you within one business day with clear, honest advice tailored to your situation.
