Many Perth families sitting on built-up equity face a choice when education costs arrive: drain savings accounts or refinance the home loan.
Refinancing to access equity means increasing your loan amount against the current value of your property, then using that released cash to cover tuition, accommodation, or course-related expenses. The funds are drawn at settlement and deposited into your account, usually within four to six weeks of lodging the application. You keep your property, the kids get their education funded, and repayments are spread across the life of the loan rather than hitting your cash reserves in one hit.
Why refinance instead of using savings or personal loans
Home loan interest is lower than almost any other form of borrowing. Accessing $50,000 through a refinance at a variable home loan rate costs significantly less over time than drawing the same amount from a personal loan, which typically sits several percentage points higher. Using savings might seem cheaper because there's no interest cost, but it leaves you without a buffer for emergencies or other opportunities. Refinancing preserves liquidity while keeping borrowing costs low.
The other advantage is repayment structure. Home loans stretch repayments over decades, so monthly obligations stay manageable. A $50,000 increase in your loan balance might only add $300 to $350 to your monthly repayment depending on your rate, compared to $900 or more on a five-year personal loan.
How much equity can you access for education costs
Most lenders will let you borrow up to 80% of your property's current value without requiring lender's mortgage insurance. If your home is worth $700,000 and you owe $400,000, you have $160,000 in accessible equity. That's calculated as 80% of $700,000 ($560,000) minus your current loan balance ($400,000). Anything beyond 80% usually triggers additional insurance costs, which can add thousands to the upfront expense.
The amount you actually need depends on the course and location. A local TAFE diploma might cost $15,000 to $20,000. A four-year degree at a Perth university with books, transport, and living costs could reach $80,000 or more if your child moves out. Interstate or overseas education pushes that higher again. Refinancing works for any of those scenarios as long as you have enough equity and can service the increased loan.
The refinance application process when accessing equity
Lenders treat equity release the same way they treat a standard refinance, with one extra step: they'll ask what the funds are for. Education is considered a legitimate purpose, but you'll need to provide supporting documents like a letter of offer from the institution or an itemised cost breakdown. That helps the lender understand the purpose is genuine rather than speculative or high-risk.
Once the purpose is confirmed, the lender orders a property valuation to establish current market value. If the valuation comes in lower than expected, your accessible equity shrinks. In suburbs where prices have plateaued or softened, that can be a constraint. Perth's northern coastal suburbs and established inner-ring areas tend to hold value more consistently, while outer fringe suburbs can be more volatile.
The approval timeline is typically two to three weeks, followed by another two to four weeks for settlement. If the semester start date is tight, lodge the application at least eight weeks ahead to allow for delays in valuation or documentation.
Should you fix or stay variable after refinancing
This depends on how long the education expenses will continue and whether you expect to need further drawdowns. If you're funding a single year of fees and want repayment certainty, a fixed rate locks in your costs for one to five years. If you're funding the first year of a three-year course and plan to access more equity later, a variable loan or a split structure gives you the flexibility to redraw or refinance again without paying break costs.
Some families split the loan: fix the amount they've just drawn for education, keep the original balance on a variable rate with an offset account. That way, any surplus income parks in the offset to reduce interest on the variable portion, while the fixed portion provides certainty on the education drawdown. It's not necessary, but it matches the loan structure to the way the money is being used.
What happens if property values fall or you need more funds later
If property values drop after you refinance, your equity shrinks and future access becomes harder. Consider a scenario where you refinance to release $60,000 for your child's first year at university, then property values fall 5% across Perth over the following twelve months. Your accessible equity has reduced by that same margin, and drawing another $60,000 the next year might push you over the 80% threshold or leave insufficient equity to approve the second drawdown.
One way around this is to access the full expected amount upfront, even if you don't need it immediately, and park the unused portion in an offset account. You're only charged interest on the drawn balance minus the offset, so if you draw $120,000 but hold $60,000 in offset, you're effectively only borrowing $60,000 until you need the rest. That approach assumes you have the discipline not to spend the offset balance on other things.
Refinancing from a fixed rate to access equity
If you're currently on a fixed rate and want to refinance for education funds before the fixed term ends, break costs apply. These are calculated based on the difference between your fixed rate and the current wholesale rate, multiplied by the remaining time on your fixed term and your loan balance. If rates have risen since you fixed, break costs are usually zero or minimal. If rates have fallen, break costs can reach tens of thousands of dollars.
Some lenders let you port your loan, which means moving your fixed rate to a new lender without breaking it, but that's rare and usually only works if you're increasing the loan with the same lender rather than switching. If your fixed rate is due to expire within six months, it's often worth waiting rather than paying the break cost. If it's got years remaining and you need the funds now, run the numbers with a broker to see whether the break cost is worth the access. You can read more about how fixed terms work on our fixed rate expiry page.
Tax treatment and structuring the drawdown
Equity released for education is not tax-deductible. The interest you pay on the increased loan balance is a personal expense, unlike investment property loans where interest can be claimed as a deduction. If you're also using equity for an investment property purchase or business expense, keep those funds in a separate loan split so the interest on the deductible portion is clearly separated from the non-deductible education drawdown. Mixing them creates an accounting mess that your accountant will need to unpick every year.
If you're refinancing and already have an investment loan or plan to buy an investment property later, talk to your broker about structuring splits upfront. It's much harder to separate the loan purposes retrospectively than it is to set them up correctly from the start. We help Perth clients structure loans for multiple purposes regularly, and the split structure is the most reliable way to maintain clarity. More on that approach is available on our refinancing page.
When refinancing for education makes sense and when it doesn't
Refinancing works when you have enough equity, can service the increased repayments comfortably, and plan to stay in the property long enough to avoid selling into a tight timeframe. It doesn't work if you're already at or near 80% equity, your income is uncertain, or you're planning to sell within a year or two.
If your child qualifies for HECS or FEE-HELP, using those government schemes defers the cost without interest until their income reaches the repayment threshold. That's often a lower-cost option than borrowing against your home. Refinancing makes more sense for private school fees, vocational courses that don't qualify for government loans, or overseas education where HELP doesn't apply. It's also useful when your child needs immediate funds for accommodation, equipment, or relocation costs that HECS won't cover.
Some families refinance because they want their child to graduate debt-free, and they'd rather carry the loan themselves against the property than have the child carry HECS debt for a decade. That's a personal decision, not a financial one, but it's valid if the numbers work and the family can absorb the repayments without strain.
If you're weighing up refinancing for education or another purpose, a loan health check gives you a clear view of your current equity, rate, and borrowing capacity before you commit. Call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
How much equity can I access when refinancing for education?
Most lenders allow you to borrow up to 80% of your property's current value without paying lender's mortgage insurance. Accessible equity is calculated as 80% of your property value minus your existing loan balance.
Is interest on equity released for education tax-deductible?
No, equity released for education expenses is not tax-deductible. The interest on the increased loan balance is treated as a personal expense, unlike investment property loans where interest may be claimed.
How long does it take to access equity through refinancing?
The refinance process typically takes two to three weeks for approval, followed by another two to four weeks for settlement. Funds are usually available within four to six weeks of lodging the application.
Should I refinance to a fixed or variable rate when accessing equity?
It depends on your needs. A fixed rate provides repayment certainty if you're funding a defined period. A variable rate or split structure offers flexibility if you expect to access more equity later or want to use an offset account.
What happens if I'm on a fixed rate and want to refinance early?
Break costs may apply if you refinance before your fixed term ends. These are calculated based on the difference between your fixed rate and current wholesale rates, multiplied by your remaining term and loan balance.
