A cash-out refinance replaces your home loan with a larger one, usually with a new lender, and pays you the difference. Most lenders will lend up to 80% of the property’s value without lenders mortgage insurance, ask what the cash is for, and assess the whole new balance at a buffered rate, so your income has to support every dollar.

Cash-out refinancing at a glance
Question Usual answer
How much can I release? Up to 80% of the lender’s valuation, less what you owe, without mortgage insurance
Can I go above 80%? Sometimes, with mortgage insurance and stricter purpose rules
Do I need to say what it is for? Yes. Renovations, investing, debt consolidation and business use are common accepted purposes
How is it assessed? The full new loan, at the rate plus a buffer, against your income and debts
What does it cost? Discharge, registration and any new-lender fees, plus mortgage insurance if you go over 80%

How much equity can you cash out?

Lenders start from their own valuation, not the price you have in mind. Take 80% of that value, subtract the current loan, and the result is the most you can usually release without mortgage insurance. That figure is your usable equity, and it is smaller than the gap between the value and the loan.

Usable equity on a $1,000,000 home
Item Amount
Lender’s valuation $1,000,000
80% of the valuation $800,000
Current loan $520,000
Cash available before costs $280,000

The home equity calculator runs the same sum on your own figures. If the valuation comes in under what you expect, the cash shrinks dollar for dollar, so it helps to know how the bank valuation is likely to land before you plan around the money.

What will a lender ask the money is for?

Every lender asks. Renovations, a deposit on an investment property, paying out other debts and business use are the usual accepted purposes, each with its own evidence: builder’s quotes, a contract of sale, payout letters or a business plan. Smaller amounts for general purposes are often accepted with less paperwork; larger amounts usually need proof of where the money is going.

Policies differ. One non-bank lender, for example, publishes unlimited cash out for acceptable purposes up to 80% of the value on its alt doc loan for self-employed borrowers. Others cap an unexplained cash-out amount. Matching the purpose to the right lender is a large part of getting this approved.

Can your income support the bigger loan?

The lender assesses the new total, not just the extra. Using the $1,000,000 case above, a couple who move from a $520,000 loan to $800,000 add about $1,679 a month in repayments at the 6% example rate over 30 years ($3,118 a month becomes $4,796). The lender tests that larger loan at 9%. On our assumptions, a couple earning $180,000 between them with no other debts passes up to about $793,000, just short of the full $800,000, so they would release a little less cash or add income to the application.

If the numbers are tight, releasing less cash, keeping other debts small or consolidating them inside the refinance can change the result. The borrowing power calculator gives a first read.

Cash-out refinance or a top-up with your current lender?

A top-up keeps your existing lender and adds to the loan, often with less paperwork and no discharge costs. A cash-out refinance moves the whole loan, which makes sense when another lender offers a lower rate, accepts your purpose more readily or values the property higher. The guide to a top-up loan versus a refinance compares the two in detail.

What does a cash-out refinance cost?

  • Your current lender’s discharge fee, set in your loan contract.
  • Government registration fees: in NSW, $182.73 to register the new mortgage and $182.73 to discharge the old one in 2026-27.
  • New-lender fees, such as application, valuation or settlement fees, which many lenders waive.
  • A break cost if your current loan is fixed.
  • Mortgage insurance if the new loan is over 80% of the value.

The full list, with a worked total, is in how much it costs to refinance.

When is cashing out a poor idea?

Rolling short-term debt into a 30-year home loan lowers the monthly payment but can raise the total interest. A $30,000 car loan repaid over five years at 9% costs about $7,365 in interest. The same $30,000 spread over 30 years at 6% costs about $34,751, unless you pay that part down faster. Cash-out works best for things that last or earn: a renovation, a deposit or clearing debts while keeping the repayments you were already paying. One couple’s plan used home equity this way towards the deposit and costs of their first investment property.

Questions people ask

Is a cash-out refinance a good idea?

It can be, when the cash has a clear purpose, the new rate is competitive and your income comfortably supports the larger loan. It is a poor idea for day-to-day spending.

How long does a cash-out refinance take?

Often two to four weeks from application to settlement, longer if the valuation or the purpose evidence needs more work.

Is the cash taxable?

No, borrowed money is not income. Whether the interest on the extra amount is tax deductible depends on what you use it for, so check with your tax agent before you spend it.

Can I cash out with bad credit?

Sometimes, through specialist lenders and usually at a lower maximum loan-to-value ratio. The guide to refinancing with bad credit explains the options.

Charles Touma compares lenders on valuation, purpose rules and rate before you apply, so the cash you plan around is the cash you get. A free 30-minute call covers your equity and the best way to release it. General information only, not credit advice; lender policies and fees change, and your own figures decide what suits you.

Sources: Moneysmart, switching home loans; NSW Land Registry Services, 2026-27 fees; Resimac, Prime Alt Doc product page, checked 20 October 2026.

General information only, not credit, legal or tax advice. Your situation is assessed properly before any recommendation. Government scheme details change; figures are current at the time of writing.