What is a home loan top-up?
Learn how a home loan top up works, when you might consider one, and what to expect in Australia.
A home loan top-up lets you increase your existing loan to access extra funds by borrowing against the equity you’ve built in your property. Unlike a redraw, where you access extra repayments you’ve already made, a top-up means borrowing new money.
A home loan top-up is when you apply to increase your current loan balance. The extra funds are added to your existing home loan and repaid over time at your home loan interest rate.
This can be more cost-effective than a personal loan or credit card. Home loan rates are typically lower than other forms of credit.
Top-ups are typically subject to:
- A full lending assessment - including your income, expenses, and existing debts
- A property valuation - to confirm your home’s current market value
- LVR limits - most lenders cap top-ups at 80% LVR to avoid LMI
How is a top-up different from a redraw?
A redraw lets you access extra repayments you’ve already made above the minimum. A top-up increases your total loan balance by borrowing new funds against your equity.
Top-up vs redraw comparison table
How is a top-up different from refinancing?
Refinancing replaces your entire home loan with a new one - often with a different lender, rate, or loan structure. A top-up keeps your current loan in place and simply adds to it.
A top-up is generally faster and cheaper than refinancing. There are no discharge or new loan establishment costs since your existing loan stays the same.
How much equity do you need for a top-up?
The amount you can borrow depends on your usable equity. Most lenders let you borrow up to 80% of your property’s current value.
Equity example
Say your home is worth $800,000 and you owe $450,000. Your equity is $350,000 ($800,000 − $450,000).
Most lenders cap borrowing at 80% of the property value. That’s $640,000 on an $800,000 home. Subtract your $450,000 balance, and your usable equity is $190,000.
This means you could apply to top up your loan by up to $190,000 without triggering LMI. Borrowing above 80% LVR may require LMI.
What can a home loan top-up be used for?
Top-ups can be used for a range of purposes, subject to lender approval. Common uses include:
- Home renovations - which may also increase your property’s value
- Debt consolidation - combining credit cards, personal loans, or car loans into one lower-rate repayment
- Investment purposes - such as buying shares, an investment property, or starting a business
- Major purchases - like a car, holiday, or education expenses
The intended use of funds may affect your eligibility and lending assessment. Some lenders restrict certain uses, for example, not allowing top-ups for business expenses or tax bills.
What are the risks of topping up your home loan?
A top-up increases your total debt. Before applying, consider:
- Higher repayments - your minimum monthly repayment will increase for the remaining loan term
- More interest over time - the extra balance accrues interest for the life of the loan, which can add up significantly
- LVR impact - if your top-up pushes your LVR above 80%, you may need to pay LMI
- Property value risk - if property prices fall, your equity shrinks and your LVR increases
Top-up vs personal loan - which costs more?
A home loan rate is typically lower than a personal loan rate. But because a top-up is repaid over the remaining loan term (potentially 20–30 years), total interest can be higher.
For example, borrowing $30,000 at 6% p.a. over 20 years costs roughly $21,600 in interest. The same amount at 10% p.a. over 5 years costs about $8,250. The personal loan costs less overall despite the higher rate.
If you plan to pay off the top-up amount quickly, it can still be a cheaper option. Consider your repayment timeline before deciding.
Unloan is a division of Commonwealth Bank of Australia.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Unloan is a division of Commonwealth Bank of Australia, and Commonwealth Bank does not provide tax (financial) advice under the Tax Agent Services Act 2009 (Cth). You should consider seeking independent tax advice from a registered tax agent, accountant or adviser before you make any decisions based on this information.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Applications are subject to credit approval, satisfactory security and minimum deposit requirements. Full terms and conditions are found on our Unloan Terms and Conditions. Modified Terms and Conditions will be set out in our Notice of Variation Agreement, if you are approved. This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.
