Property valuation for refinancing and accessing equity

When you refinance, the lender orders a fresh valuation of your property, and that figure largely decides how much equity you can access. Refinancing recalculates your loan-to-value ratio against the new valuation rather than what you originally paid, so a higher valuation unlocks more usable equity and can even qualify you for a better interest rate.

Why a valuation matters when you refinance

A refinance is a new loan, so the lender needs a current value for the property, not the price you paid years ago. They order their own valuation, and your loan-to-value ratio, or LVR, is recalculated using your current loan balance against that fresh figure.

That recalculation is the whole point. As your property has grown in value and you have paid down the loan, your LVR falls, and the gap that opens up is the equity you may be able to access. The valuation is what turns that equity from a number on paper into something a lender will actually lend against.

How usable equity is calculated

Not all of your equity is usable. Lenders generally let you borrow up to 80% of a property's value without Lenders Mortgage Insurance, so usable equity is commonly worked out as 80% of the valuation minus your current loan balance.

For example, on a property valued at $800,000, 80% is $640,000. If you still owe $400,000, your usable equity is roughly $240,000. Push past 80% and you can usually still borrow, but Lenders Mortgage Insurance applies, which adds cost. You can get a sense of where you sit with our LVR calculator.

The valuation drives how much you can borrow

Because usable equity is calculated from the valuation, the figure the valuer arrives at directly sets your borrowing power. A higher valuation means a lower LVR and more accessible equity, and it can also move you into a cheaper interest rate tier, since lenders reserve their best rates for lower LVRs.

The reverse is also true. A conservative or low valuation lifts your LVR, shrinks your usable equity, and can even tip you over 80% and into LMI territory. This is why the valuation, not just your loan balance, decides what a refinance can deliver.

What valuation the lender uses

For a refinance, the lender chooses the valuation type based on risk, drawing on the same spectrum used for any loan: an automated or desktop valuation for lower-risk, lower-LVR situations, a kerbside inspection where a look at the exterior is warranted, or a full inspection for higher-risk or higher-value cases. It is the lender's valuation, commissioned through their panel, and it tends to be conservative, because the bank is protecting itself. Our guide to a valuation versus a bank valuation explains why a bank figure can sit below what you expect.

What happens if the refinance valuation is low

A low valuation is the most common refinance frustration, because it directly reduces the equity you can pull out. If the bank's figure comes in below what you believe the property is worth, you have a few options: submit comparable sales evidence through your broker to support a higher figure, try a different lender whose valuer may assess it differently, or wait and revisit after the market or the property has improved. Our guide to disputing a low valuation walks through this.

It is also worth remembering that value you have added counts. If you have renovated since your last valuation, make sure the valuer is aware of the work, since improvements the model or a drive-by cannot see may otherwise be missed. Our guide to renovations that add value covers what genuinely moves the figure.

How an independent valuation helps before you refinance

Going into a refinance blind to your likely valuation is how people get caught out. An independent valuation before you apply gives you a realistic view of what your property is worth and therefore how much equity you can expect to access, so you can plan the refinance around a real number rather than a hopeful one.

It is not the bank's valuation and will not replace it, but it tells you where you stand, flags whether a low bank figure is worth challenging, and helps you choose the right lender and loan amount before you commit to an application.

How Valato helps

If you are planning to refinance or tap into your equity, Valato prepares independent, evidence-based valuations across Australia, so you know your likely value and usable equity before you apply. You can compare the options or order in a couple of minutes, and speak with your mortgage broker about structuring the refinance.

Frequently asked questions

General information only: This article is general in nature and does not take into account your individual circumstances. It should not be relied on as financial, tax or legal advice. Speak with a qualified professional, such as your mortgage broker, before making decisions about refinancing or accessing equity.