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Refinancing a home loan without equity

Rates and Fees verified correct on December 6th, 2016

How can refinancing a home with minimal equity become a reality?

Home Loan Tip

Refinancing a home involves moving from your existing home loan to a new home loan. During the process, many lenders allow you to borrow more, provided that your property value has increased and you've paid off enough of your mortgage.

As a rule of thumb, you typically need at least 20% equity build up in your property to qualify for a refinance home loan. However, there many be some niche or specialist lenders that will approve your refinance application with less than this amount.

Keep in mind that it may not be possible to refinance your home loan with no equity.

While 100% home loans are no longer available, there are ways that you can apply for a refinanced mortgage with little equity such as through a guarantor loan.

Read on to find out how you can switch lenders with minimal equity.

Information about low deposit home loans

The loans below are not 0% deposit or no equity home loans, but allow applications from borrowers with 5 - 10% deposit or equity.

Compare 90 - 95% LVR home loans

Rates last updated December 6th, 2016.

NAB Tailored Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)

Interest rate now 3.85%

July 12th, 2016

NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)

Interest rate now 3.75%

July 12th, 2016

ANZ Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)

Comparative rate decreases by 0.10%

August 12th, 2016

View latest updates

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Offset account
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Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)
Enjoy a fixed home loan with discounts on rates and other NAB products.
3.75% 4.87% $0 $395 p.a. 95% Go to site More info
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - Up to 110% LVR
Discounted rate available with family pledge loans. Family pledge loans require no LMI and no deposit. NSW, Qld and ACT only.
3.89% 3.89% $0 $0 p.a. 110% Go to site More info
NAB Base Variable Rate Home Loan - Owner Occupier (P&I)
A competitive no frills home loan with no application fees for a limited time. 250,000 Velocity Frequent Flyer point offer, conditions apply.
4.10% 4.14% $0 $0 p.a. 95% Go to site More info
NAB Tailored Fixed Rate Home Loan - 3 Year Fixed (Owner Occupier)
Flexible fixed rate home loan which will allow you to take a break from repayments if you're ahead of scheduled repayments. 250,000 Velocity Frequent Flyer point offer, conditions apply.
3.99% 5.04% $600 $8 monthly ($96 p.a.) 95% Go to site More info
IMB Essential Home Loan - LVR > 80% (Owner Occupier)
Enjoy a 100% offset account and no monthly fees.
4.31% 4.33% $0 $0 p.a. 95% Go to site More info
NAB Tailored Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)
A fixed rate home loan with the ability to lock the interest rate at the time of loan approval for up to 3 months. 250,000 Velocity Frequent Flyer point offer, conditions apply.
3.85% 5.12% $600 $8 monthly ($96 p.a.) 95% Go to site More info
ANZ Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)
Lock in your rate for 2 years with an interest only option.
3.90% 5.06% $600 $10 monthly ($120 p.a.) 95% More info
Westpac Flexi First Option Home Loan - 3 Years Introductory Special Offer (New Owner Occupier, P&I)
A limited time deal for new owner occupiers. Advertised rate includes 1.03%p.a. discount for the first two years.
3.99% 4.37% $0 $0 p.a. 95% More info
St.George Fixed Rate Advantage Package -  2 Year Fixed Rate (Owner Occupier)
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cash back available for refinancers, conditions apply.
3.99% 5.07% $0 $395 p.a. 95% More info
Commonwealth Bank Wealth Package Fixed Home Loan - 2 Year Fixed (Owner Occupier)
Fee free extra repayments available during the fixed term. $1,250 cash back offer for refinancers. Conditions apply.
3.99% 5.00% $0 $395 p.a. 95% More info
Beyond Bank Basic Variable Rate Loan - (Owner Occupier)
Enjoy 100% offset account with redraw facility and borrow up to 95% LVR with low monthly service fee.
4.40% 4.57% $445 $11 monthly ($132 p.a.) 95% More info
ING  DIRECT Orange Advantage Loan - $150,000+ (LVR > 90% Owner Occupier)
A fully featured home loan with an offset account and discounts available.
4.65% 4.86% $0 $199 p.a. 95% More info
Commonwealth Bank Standard Variable Home Loan - Owner Occupier
Standard variable home loan with a low doc option for self-employed borrowers.
5.22% 5.37% $600 $8 monthly ($96 p.a.) 80% More info
Credit Union SA Variable Rate Home Loan - $20k and above (Owner Occupier)
A variable home loan that allows you to borrow from $20,000.
5.19% 5.25% $600 $0 p.a. 80% More info
Suncorp Bank Standard Variable Rate Home Loan  - (Owner Occupier)
Enjoy a competitive interest rate, make fee free extra repayments and a redraw facility.
5.40% 5.56% $990 $10 monthly ($120 p.a.) 95% More info
ANZ Breakfree Home Loan Package  - $250,000 up to $499,999 (LVR >80% Owner Occupier)
Pay no application fee with 100% offset account with redraw facility and borrow up to 95% LVR.
4.50% 4.60% $0 $395 p.a. 95% More info
Bank of Melbourne Basic Home Loan - Regular Rate (Owner Occupiers, P&I)
Ideal for first home owners or anyone who wants a no-frills, basic variable rate home loan.
4.64% 4.69% $500 $0 p.a. 95% More info
St.George Basic Home Loan - Promotional Rate (Owner Occupier, P&I)
A no frills loan with a competitive rate and a maximum LVR of 95%.
4.08% 4.09% $0 $0 p.a. 95% More info
Westpac Rocket Repay Home Loan - Principal and Interest
The Westpac Rocket Repay Home Loan lets borrowers to own their home sooner with a 100% offset to save on interest.
5.29% 5.43% $600 $8 monthly ($96 p.a.) 95% More info

How can I refinance with minimal equity?

  • refinance home loanConsider specialist lenders. If you're looking to refinance and you've only built up a small amount of equity in your home, think about refinancing to specialist lenders or building societies. These lenders may have more lenient eligibility criteria when it comes to determining your serviceability potential. If you can demonstrate that you have enough savings, income or assets to service the loan, the lender may overlook the minimal amount of equity that you have.
  • Find a guarantor. With a small amount of equity in your existing home, you may want to refinance to a guarantor loan. This can boost your borrowing capacity as the guarantor essentially takes responsibility for servicing the loan if you default.
  • Independent valuation. If you can prove that your property has increased in value, then the lender may be more inclined to let you refinance and borrow a larger amount of funds.
  • Speak to a broker. When undergoing the refinancing process, it's a good idea to sit down with a broker to discuss your options with a mortgage broker. An experienced broker can draw upon their relationships with lenders to find one that's more likely to review your application. A broker can also negotiate the terms of the refinanced mortgage on your behalf.
  • Request a copy of credit file. With a small amount of equity, you present a larger risk to the lender. This is why it may be a good idea to take measures to trim your existing debt and clean up your credit file. If you can show the lender that you make a conscious effort to meet your repayments on time and make extra repayments in the past, then they may be more likely to approve your refinance application.

What's equity?

Equity refers to the portion of your property that you actually own, which can be worked out by subtracting the outstanding loan amount from the market value of the property.

Calculating your equity

Calculate your equity

For example, if you purchased a home for $450,000 with a $70,000 deposit and five years later had paid off $35,000 from your principal, you'd be left with a principal of $345,000. If your property had increased in value, let's say by 10%, you'd have $150,000 in equity in your home.

How to work out principal remaining

$450,000 (original purchase price) - $70,000 (deposit) = $380,000

$380,000 - $35,000 (amount of principal paid off after five years) = $345,000

10% (value increase) of $450,000 = $45,000

$450,000 + $45,000 = $495,000

$495,000 - $345,000 (principal remaining) = $150,000.

How much equity do I need to refinance?

The amount of equity that you need to refinance will depend on the lender's individual criteria. However, it's important to note that many loans come with a maximum LVR of 95%, which means you cannot borrow more than 95% of the value of your home.

As a result, if you wish to refinance you need to have at least 5% equity in your home. Generally, you need at least 20% equity build up in order to qualify for a refinanced mortgage.

If you've only had your existing home loan for 5-10 years, refinancing may be risky as you may not have built up enough equity to qualify with a new lender and switching lenders may not benefit you financially. This is why it may be important to speak with your accountant or mortgage broker to ensure that refinancing is the right decision for you.

Learn more about the amount of equity that you need to refinance your mortgage.

Why do we need equity to refinance or purchase a property?

Equity is important to a lender because it indicates the amount of risk you have as a borrower. A smaller amount of equity means you own less of your home and therefore means there's a greater chance that if you defaulted on your loan and had to sell your property, the value of the property wouldn't be enough to cover the outstanding principal.

Prior to the Global Financial Crisis (GFC), 100% loans where you needed no deposit were common within the home loan market. However, following the GFC, many banks have tightened their lending criteria as they recognise the importance for borrowers to complete a deposit as it protects the lender in the event that they default on the loan.

Marc Terrano

A passionate publisher who loves to tell a story. Learning and teaching personal finance is his main lot at finder.com.au. Talk to him to find out more about home loans.

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2 Responses to Refinancing a home loan without equity

  1. Default Gravatar
    Rachel | August 21, 2014

    We want to refinance our mortgage.
    Current professional evaluation came in at $865,000 resale and we currently have a home loan of $715,000 and wish to increase it to $780,000.
    We also have a guarantor willing to put up an unmortgaged property over the loan. We have already been rejected by Westpac as they apparently don’t allow guarantee on a refinance only a new home purchase.
    I had never heard of this, please advise your thoughts……

    • Staff
      Shirley | August 22, 2014

      Hi Rachel,

      Thanks for your question.

      In general, guarantors are designed to help first home buyers purchase a property. Some banks might not be able to offer this feature when it comes to refinancing.

      If you’d like, you might want to speak to a mortgage broker; they may be able to point you in the right direction and help you with your application.

      Cheers,
      Shirley

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