If you’ve owned property in Sydney for a few years, there’s a good chance you’re sitting on more equity than you realise — and a lot of homeowners don’t know they can use that equity to buy their next investment property without saving a separate cash deposit.
This is called a cashout refinance, and it’s one of the most powerful strategies a Sydney mortgage broker can help you execute — done right, it can fast-track your investment portfolio without touching your savings account.
What Is a Cashout Refinance?
A cashout refinance is when you refinance your existing home loan to a higher amount than you currently owe, and take the difference as cash. That cash can then be used as a deposit — or even full purchase funds — for an investment property.
Here’s a simple example:
- You bought your home in Penrith in 2020 for $750,000
- Current value: $1,050,000
- Remaining loan: $510,000
- Usable equity (to 80% LVR): $1,050,000 × 80% = $840,000 minus $510,000 = $330,000 available
You refinance your home loan, drawing out $200,000 of that equity. You now have a $200,000 deposit ready to use for an investment property purchase — without saving a single extra dollar.
Why Sydney’s Market Makes This Work
Sydney property values have grown significantly in many suburbs over the past 3–5 years. Areas like Parramatta, Liverpool, and the Hills District have seen median values jump 25–40% since 2021, which means a lot of homeowners are equity-rich right now — even if they don’t feel financially flush.
The challenge is that most major banks won’t volunteer this information to you. Your bank is happy to keep servicing your existing loan. A broker’s job is to look at your full picture and ask: what can we actually unlock here?
What the Banks Get Wrong — And What a Broker Does Differently
When you walk into a bank for an investment loan, they assess you against their own policies — their own serviceability calculators, their own LVR limits, their own rental income shading rules. If you don’t fit neatly into their box, they decline or come back with conditions that make the deal unworkable.
Here’s what that looks like in practice:
A client of ours — let’s call him Mark, 41, electrician from Blacktown — had a home worth $920,000 and a loan of $430,000. He wanted to buy a $680,000 investment unit in Merrylands. His bank told him his borrowing capacity wasn’t enough and he’d need a 20% deposit sitting in cash.
We ran his numbers across 14 lenders. Two non-bank lenders assessed rental income more favourably (counting 80% of gross rent vs the bank’s 65%), and one had a lower living expense benchmark. Combined, his borrowing capacity jumped by $94,000. We structured his home loan refinance to release $136,000 in equity, which covered the 20% deposit plus stamp duty and costs. Deal done — one application, no cash savings required.
The Numbers You Need to Know Going In
Investment loans in Sydney right now typically sit between 6.20% and 6.80% p.a. variable on principal and interest, and between 6.50% and 7.10% on interest-only. The RBA cash rate is currently 4.60%, and lenders are adding their margin on top.
APRA still requires lenders to stress-test you at your actual rate plus 3.00% — so if your investment loan rate is 6.50%, the bank checks that you could afford repayments at 9.50%. That’s why having a broker find the lender with the most favourable servicing model matters so much right now.
Stamp duty in NSW on a $700,000 investment property is approximately $27,440. You can’t avoid this — it has to come from somewhere, whether equity or savings. This is one of the biggest reasons cashout refinancing is popular with Sydney investors: it solves the stamp duty problem without derailing your savings.
Interest-Only on Your Investment Loan — Still Worth Considering
Many investors opt for interest-only repayments on their investment property for the first 5 years. The logic is straightforward: the interest component of an investment loan is tax deductible, so you want to maximise that deduction while keeping cash flow strong. You’re not paying down the principal on the investment property — instead, you direct surplus cash toward paying down your non-deductible owner-occupier home loan faster.
On a $680,000 investment loan at 6.70% interest-only, monthly repayments are approximately $3,797. On P&I over 30 years at the same rate, repayments would be $4,403. That’s $606/month in extra cash flow — which can go straight onto your home loan offset account, saving you interest on your non-deductible debt.
Not every lender or every deal suits interest-only. Your tax situation and the specific property matter. A broker who understands investment structuring — ideally working alongside your accountant — will give you the right read on this.
Traps to Watch Out For
Cross-collateralisation: Some banks will try to link your investment loan security to your home as well. This gives the bank more control and fewer options for you down the track. An experienced broker will structure the loans as separate securities wherever possible.
Going to your existing bank first: It’s tempting — they already know you, and you have a relationship. But your bank has no incentive to give you their sharpest rate or most flexible structure. They’ll offer you what fits their sales targets.
Underestimating holding costs: Beyond the mortgage, you’ve got council rates, water rates, landlord insurance, property management fees (typically 7–9% of rent in Sydney), and potential vacancy periods. Factor these in before committing.
Ready to Find Out What Your Equity Can Do?
If you’ve been sitting on Sydney property for a few years and wondering whether now is the right time to make your next move, the first step is getting an accurate equity assessment — not a rough estimate from a bank website, but a real number from a real lender’s calculator.
At Loan Connect, we run this analysis across our full lender panel and come back with a clear picture: what you can borrow, what structure makes sense, and what the repayments look like in real numbers. No obligation, no fluff — just a straight answer.
Book a free consultation with our team and let’s find out what your equity is actually worth.
