How to make cash out refinance work for you

A very useful tool but important to do right so you don't end up paying a lot more in unwanted interest

Cash out – everything you need to know

When you refinance to borrow money (from your property’s equity) to use for renovations or a new car, for example, lenders call this a “cash out” refinance.

Sometimes people take out a personal loan against their mortgage or borrow some money to pay off credit card debt.

You can essentially borrow money to put towards anything – a wedding, a new roof, your third Lamborghini – but only up to a certain amount. Each lender has their own rules and sets their own limits, and above these limits you will need to prove how the funds will be used. No lender has faith in you launching a small-scale newspaper operation, for example.

Your equity is the difference between the value of your home and the amount you still owe on it. Thanks to the significant rise in property prices over the last decade or so, it could be a substantial sum.

For example, let’s assume you bought a house 10 years ago for $500,000 and have $200,000 left on the home loan. If this property is now valued at $800,000 then your equity is $600,000.

Most lenders allow borrowing of 80% of the value of the property, minus the debt that you have left to pay. So in this example, you could access $440,000 of your equity. With this sum, you could make significant investments and potentially take advantage of tax benefits – such as depreciation and negative gearing on an investment property – to get your money working for you.

Bear in mind though, the amount of equity you can access will depend on the lender’s valuation – and this could be lower than you expect. Many lenders also place restrictions on equity home loans because of the risk of the lump sum released not being used for its intended purpose. Also, because you will be paying off this amount over the term of the loan you might end up paying more interest then you would have paid if you had taken out a shorter loan, such as a personal loan over five years. uno can help you work out if it is the right option for you.

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What you’ll need:

  • ID, payslips and bank statements
  • A home valuation

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Gabe Windsor
October 26, 2023
What a fantastic experience using UNO Home Loans. Mike Parsons and the team were exceptional. Such an easy, hassle free experience, cannot recommend them highly enough. Mike Parsons was in touch every step of the way, and with him doing all the leg work, the transition to a refinanced home loan was a very easy one. Thank you!
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July 1, 2023
Scott Wilkinson has been fantastic when dealing with my broking needs. He has held my hand through every step of the way and has made purchasing my first home a much more comfortable experience than I anticipated.
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July 1, 2023
Awesome team, Very reliable and friendly. Scott Wilkinson is very experienced and knowledgeable.He guided us throughout the process and was available to help.
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June 1, 2023
I have worked with Scott Wilkinson to get my home loan and he has been a massive help to navigate my first home purchase. He has taken care of all the financial details and I didn't need to worry about anything. Highly recommend him for his professionalism, patience and support!
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Kelly O'Connor
June 1, 2023
You won’t find any broker better than Anita at UNO. We’ve told all our friends and family about her and will be using her for all our mortgages in the future! A stress free process from the start. She listened to our needs and was always available.
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Ashley Morson
We are truly grateful for uno home loans and our broker Karis Churchill. This is our second time purchasing a home with the help from Uno and both times have been a very positive experience. Our recent purchase had many obstacles due to different factors however it was our dream home and we were up for the challenge. Our broker Karis was a true support and went above and beyond. She communicated so well with our solicitor and the real estate agents. She kept us updated through every step and kept us motivated when things seemed impossible. Uno is very fortunate to have Karis as a broker and we would highly recommend her to anyone. Our family are so happy we are now in our new forever home. Thank you so much Karis and to the uno team!!!
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Thank you Eren for your quick and efficient turn around time to getting an approval for a loan. Will be recommending you to anyone that needs a quick and reliable loan.
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