How To Make A Home Loan Increase

A home loan increase allows you to borrow additional funds against your existing property. If your current lender considers you eligible, you can access your usable home equity.

This strategy helps fund renovations, debt consolidation, or property investment without the need to switch lenders.

How Does Home Equity Release Work?

Home equity equals the difference between the current market value of your home and your total outstanding loan balance. You must have sufficient equity available in order to access it.

If you qualify, you can release all or part of this equity to finance personal expenses or investment-related borrowings. There are two primary ways to release equity: a loan top-up or a loan split.

Top-Up vs. Split – What Are Your Options?

You can structure your home loan increase in two different ways. A loan top-up combines your existing loan and new funds into a single account. In contrast, a loan split divides your mortgage into two separate accounts.

What Is a Home Loan Top-Up?

A loan top-up adds the newly borrowed funds directly to your existing mortgage balance.

• Your loan account number remains exactly the same.
• The loan term, interest rate, and repayment cycle do not change.
• The only adjustment is an increase in your regular repayment amount.

What Is a Home Loan Split?

A loan split creates a brand-new, separate loan account for the additional funds while keeping your original loan intact.

• You will manage two separate accounts and make two separate repayments.
• Because the new loan is separate, you can apply for a different loan term, interest rate type (e.g., fixed vs. variable), or repayment cycle.

Top-Up vs. Split Comparison

Why Do Borrowers Apply For a Home Loan Increase?

Borrowers typically increase their home loan to access cheaper interest rates for major life expenses. Common reasons include funding home renovations, consolidating high-interest personal debts, buying a new property, or investing in shares.

Can You Fund Home Renovations?

Yes, you can apply for a home loan increase to fund a major renovation project. Depending on your required loan amount, the type of renovation, and your Loan-to-Value Ratio (LVR), you may be able to cash out equity to get the job done.

When assessing your application, your lender will likely require the following documents:

• Copies of the official building plan.
• Written council consent or approvals.
• A signed building contract or builder quotes.
• A professional revaluation report for your property.

How Does Debt Consolidation Work?

You can combine multiple high-interest debts such as credit cards or personal loans by consolidating them through a home loan increase. Consolidating all your debts under a single mortgage helps you avoid juggling multiple repayment cycles.

Furthermore, mortgage interest rates are significantly cheaper than rates on unsecured personal loans.

For example: Suppose you currently pay a 2.5% interest rate on your home loan and a 7% interest rate on your car loan. If you increase your home loan to pay off the car, you will only pay 2.5% interest on that debt. As a result, you could potentially save thousands of dollars in interest.

Can You Buy a New Home or Invest?

With a home loan increase, you can leverage your current equity to expand your property portfolio. You can use the extra funds to purchase a new property outright or to pay the deposit and stamp duty on a new purchase.

In addition, banks often grant investment-income home loans related to dividends. You can apply for a loan increase if you require funds to invest in ASX-listed company shares that provide dividend income.

Home Loan Increase vs. Refinancing - What Is the Difference?

A home loan increase involves borrowing more money from your current lender, usually keeping your existing interest rate and terms. In contrast, refinancing involves moving your entire mortgage to a completely new lender to secure a lower interest rate, better terms, or greater borrowing capacity.

Most borrowers do not know the difference between a home loan increase and refinancing. While both strategies allow you to consolidate debt and access equity, they serve different purposes.

Note: You can actually refinance your home loan with a different lender and apply for a loan increase at the exact same time.

What Are the Benefits and Disadvantages?

Increasing your mortgage offers the distinct benefit of single, lower interest payments for consolidated debts. However, a major disadvantage is that spreading short-term debts over a 30-year mortgage term can cost you more in total interest.

Benefits of Increasing Your Loan

• A loan split allows you to secure a different loan term and interest rate for the newly borrowed funds.
• If your financial situation and serviceability have not changed since your original application, approval is highly likely.
• A top-up keeps everything under one easily manageable account. You pay a single, lower interest rate for all consolidated loans.

Disadvantages to Consider

• A standard home loan term is 30 years. If you consolidate a 5-year car loan into your mortgage without creating a split account, you will pay interest on that car for up to 30 years.
• The process requires a full serviceability assessment. It is similar to your original mortgage application, which can be time-consuming.
• If your financial situation has worsened, your lender may reject the increase. This leaves a negative enquiry on your credit file, which can hurt future borrowing power.

Important Note: You generally cannot apply for a home loan increase if you are an expat or currently hold a guarantor home loan.

Are You Looking to Increase Your Home Loan?

Home Loan Experts’ team of award-winning mortgage brokers will check your usable equity and calculate your loan serviceability to see if you qualify for a home loan increase.

According to our internal policies, we will only submit your application after making sure it has the highest possible chance of approval.

If you are looking to increase your home loan through a fast, efficient, and stress-free process, call us today on 1300 889 743 or complete our free assessment form to speak with a specialist mortgage broker.