Home loan increase

Got equity in your home? Pay for renovations and other grand plans by increasing your home loan.

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What is a home loan increase?

A home loan increase, also known as a top up, lets you borrow against your current property, as long as you have enough ‘usable equity’ in your home, and you can afford to make the additional repayments. Most people use the extra money – which is at home loan interest rates – to pay off other debts, renovate or buy assets like shares or a new car.

Why increase your Bank of Melbourne home loan?

Combining debts, at home loan rates

You could pool your debts (e.g. personal loans and credit cards) into one home loan repayment with a lower interest rate.

Investing using your equity

Access extra money to buy shares, increase your property’s value through a renovation, or put down a deposit on an investment property.

Option to separate your repayments

Set up a separate account on a different loan term, or simply combine your new loan amount with your current loan repayments.

Buying, at home loan rates

Spend your extra cash on a new car, holiday or whatever you need (remembering to repay the purchase in the short-term).

How should I apply for a home loan increase?

1. Check your loan type

Home loan increases are available with variable home loans, but not relocation loans (bridging loans) or loans in the name of a trustee (e.g. loans to self-managed super funds). For an increase on a fixed rate loan, we will open a separate loan account.

2. Estimate usable equity

Usable equity = 80% of your property’s estimated market value, minus your current home loan balance. If your new loan-to-value ratio (LVR) exceeds 80%, you’ll likely need to pay lenders mortgage insurance.

3. Have proof of income at hand

You’ll need some income documents, like payslips, so we know you’ll be able to afford the extra repayments.

4. Check your repayment history

Be up-to-date with your repayments before applying, as approval can depend on your repayment history.

5. Talk to us

Request a call back by selecting ‘increase my home loan’ from the ‘I want to' menu. A home loan expert will be in touch. We may need to value your home.

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Tell me more

You'll need 'usable equity'

Equity = property market value - loan balance

The equity in your home is the difference between the market value of your home and your current home loan balance. But you won’t necessarily be able to borrow against all of your equity.

Usable equity = 80% of property market value - loan balance

If you’re ahead on repayments, or your home’s value has gone up, you may have ‘usable equity’ to allow for a top up. We calculate usable equity as 80% of the value of your property, minus your loan balance.

Example

Let’s say Kim's property is worth $900,000 and he has a $400,000 home loan. We'll calculate 80% of his home's value: 80% of $900,000 is $720,000. We’ll then subtract $400,000 (loan amount) to get Kim’s usable equity of $320,000.

Eligibility: we’ll also want to be comfortable that borrowers can afford the extra repayments, so we’ll also consider Kim's income, debts, expenses and liabilities.

Kim applies for a $36,000 home loan increase to buy a new car. He’s approved and now owes $436,000 at home loan interest rates. NOTE: if Kim wants pay off his car in 3 years, he should increase his home loan repayments by $1000 a month plus interest ($36,000 / 3 years = $12,000 per year).

What’s the difference between my loan limit and loan balance?

Your loan balance is the amount you currently owe, and are paying interest on.
Your loan limit is the combination of your balance and available credit (when you’re on Principal & Interest repayments, your limit reduces over time).

If your home loan limit increase is approved, interest will only be charged on your balance, not the new limit you have in place.

Estimate your higher repayments

Advantages and considerations

Pros

Home loan interest rates are often lower than personal loans, and having one larger repayment means less admin for you.
You’ll just pay interest on the money you draw down, not your increased home loan limit.
The top up application process is often quicker than applying for a new loan.
We’ve removed our top up fee.

Cons

If you plan to buy an investment property, there are potential tax implications so chat with your accountant.
Increased debt means more interest, and increased home loan repayments.
There may be an associated property valuer fee when topping up. And if you top up by opening a separate loan account, some loans may come with an establishment fee. Request a call back and one of our lenders will call you back to let you know.
Taking advantage of lower home loan interest rate savings (compared to short-term credit card and personal loan rates) only really works when you repay the extra amount within a similar timeframe. Example: let’s say Steph pays for a $20,000 overseas family holiday using her home loan top up, instead of a 3-year personal loan. If she spreads the extra purchase over the life of her home loan, Steph will likely end up paying more interest in total. Instead, Steph should increase her home loan repayments to cover the extra $20,000 within 3 years of topping up.

Can I use my equity to create a separate loan?

Yes you can. Instead of increasing your current home loan balance, we could simply set up another home loan account for you. This lets you get features that your current loan might not have, like a fixed or variable rate, an offset account or a different loan term.

Depending on your situation, there may be an establishment fee on your extra loan. To find out, request a call back and one of our lenders will call you back to chat through your options.

Paying off other debts

Let’s say you owe money on a personal loan and credit card with another bank, plus a Bank of Melbourne home loan and new car loan. When you successfully apply to consolidate debts with a home loan top up, we'll use the additional funds to pay off all your non-home loan debt accounts for you – even the debts with other banks – then add the combined amount to your home loan balance.

Tips

Cancel the loans and credit cards you’ve paid out.
You'll only enjoy home loan interest rate savings (compared to higher short-term loan rates) if you repay the extra home loan amount within a comparable term. Let’s say, for example, that you consolidate a $50,000 3-year car loan into your home loan. If you don’t accelerate your home loan repayments to repay that $50,000 by year 3, your car purchase will be spread over the life of your long-term home loan – and you’ll end up paying more interest in total.
Do your best to pay off more than the minimum repayment amount, or you could end up paying compound interest (interest on interest). If you find yourself struggling, let us help you get back on top of things.

Renovating

You can use your loan increase to cover a cosmetic renovation that costs under $100,000, e.g. a kitchen upgrade, floorboards or solar of your roof.

When your renovation might be more than $100,000, or it includes structural changes like building another room, it may be worth thinking about topping up with our building option. Available on our Standard Variable Rate Home Loan, the option allows you to draw down funds progressively as you meet each stage of your construction milestones – which means you’ll only be charged interest as your build progresses. We can set up a separate loan account and we can manage the progress payments for you, allowing you more project control.

Estimate your home rebuild costs

What can I use my home loan increase for?

How can I check my current home loan rate?

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Rates & calculators

Guides

The Detail

Conditions, credit criteria, fees and charges apply. Based on Bank of Melbourne’s credit criteria, residential lending is not available for Non-Australian resident borrowers. Interest rates subject to change. Before making a decision, it’s best to read the terms and conditions.

Loan Accounts – Charges for specific services and accounts (PDF 360KB)

This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information to your own circumstances and, if necessary, seek appropriate professional advice.

Key Fact Sheet for Home Loans

Home loan increases, also known as top ups, are subject to approval.

Other fees and costs (PDF 360KB) may apply. Talk with one of our lenders about a potential property valuer fee, or a lending establishment fee when you top up via a separate loan account.