Current valueiA lender valuation is usually more conservative than an agent appraisal - test the number the bank will actually use.
$200k$4m
Loan balance
$0$3m
The bank lends against today's value
Refinance Calculator - what your equity releases
Growth becomes deposit: the cash a refinance frees at your target LVR, the LMI toll above 80%, and the honest repayment comparison - same remaining term on both sides.
Cash released at 80% LVR
Net cash released
$220,000
New repayment
$4,683/mo
+$1,431/mo vs current
The released cash costs $13,420 a year in interest at 6.1%. Used as a deposit, $220,000 supports roughly a $880,000 purchase at 80% LVR once buying costs are covered - run it through the borrowing power calculator to see if the income side agrees.
Lender policies differ on cash-out size and purpose evidence. Figures follow from your assumptions - not a recommendation.
Equity position
Current LVR
56%
$500,000 on $900,000
Usable at 80%
$220,000
no LMI
Usable at 90%
$310,000
LMI applies
New facility
$720,000
80% LVR
Found the next deal? Run the released cash through it before the refinance settles.
Equity is only useful once a bank agrees to lend against it
Paper equity and usable equity are different numbers. The market may say your property has grown $200,000; the bank will lend against its own valuation, to its own LVR ceiling, minus what you still owe. That is the figure this calculator isolates - because it is the deposit for the next purchase, and because releasing it reprices your entire facility, not just the new slice.
Two costs hide in a cash-out refinance. Above 80% LVR, lenders mortgage insurance is charged on the whole new loan - crossing the line for a few extra thousand dollars of release is usually poor value. And any refinance that quietly stretches the term back to 30 years buys a lower repayment with years of extra interest. The comparison here holds the remaining term constant so the repayment change you see is real.
Whether the interest on released cash is deductible turns on what the money is used for - the purpose test - not on which property secures it. Investment use generally deducts; private use does not. Keep the released amount in its own split. For what the reform means for the property you would buy with it, start with Am I Grandfathered? and the negative gearing calculator.
Frequently asked questions
How does equity release from an investment property work?
The bank lends against what the property is worth today, not what you paid. If the value has grown, refinancing to the same LVR frees the difference as cash - typically structured as a separate loan split so the interest is cleanly traceable. Most lenders cash-out to 80% of a current valuation without mortgage insurance; some go higher with LMI and tighter scrutiny of what the cash is for.
Why does 80% LVR matter so much?
It is the line above which lenders mortgage insurance applies. LMI on a refinance is charged on the whole new facility, not just the released portion, so crossing from 80% to 85% can cost thousands of dollars for a modest amount of extra cash. The calculator shows the estimated premium whenever the target LVR goes above 80% and nets it from the release.
Is the interest on released equity tax deductible?
Deductibility follows the purpose of the borrowing, not the property securing it. Cash released against an investment property and used to buy another investment is generally deductible; the same cash spent on a holiday or a car is not, even though an investment property secures it. Mixed use creates apportionment problems - which is why a separate loan split for the released amount is standard practice. Specific advice belongs with your accountant.
Does refinancing restart my loan term?
Only if you let it. Rolling a 25-years-remaining loan into a new 30-year term cuts the monthly repayment but adds five years of interest. This calculator keeps the remaining term constant on both sides so the repayment comparison is honest; if a lender quotes you a lower repayment, check whether a longer term is doing the work.
What value will the bank use?
A lender valuation, which is routinely more conservative than an agent appraisal or your own estimate - desktop valuations especially. If the numbers here only just work at your estimate, they may not work at the bank's. Ordering valuations through a broker across two or three lenders is free and often moves the answer by tens of thousands of dollars.
LMI is an estimate from standard premium bands; actual premiums vary by lender and policy. Serviceability is not assessed here - a lender must also pass the released loan through its buffer, which the borrowing power calculator approximates. General information only.