By Jeremy Harper, Director — hfinance
Here’s a frustrating spot plenty of homeowners find themselves in:
you’ve got serious equity in your home, but your bank won’t lend you a
cent more. Rates have jumped, credit cards have crept up, and the one
thing that would fix your cashflow — restructuring your debt — is the
one thing servicing rules won’t let you do.
Equity-rich and cashflow-poor is more common than people admit. And
it’s solvable.
Why strong equity isn’t
enough
Banks assess two things: the value in your property, and your ability
to service new lending on today’s rules. You can be excellent on the
first and still fail the second — especially after rate rises, a dip in
business income, or a stretch of reduced hours.
So the bank sees the equity, agrees it’s there, and still says no.
That’s not a reflection on you. It’s the servicing test doing its job a
little too bluntly.
Using equity to reset
your repayments
For homeowners in this position, a second mortgage through a
specialist lender can unlock equity to restructure — often with no
monthly repayments and no fixed term, with interest accruing until you
refinance or sell.
Rate shock. Take a couple whose home was worth about
$2.75M with a $1.4M mortgage, two kids in private school, and $100K in
credit card debt. Their loan had reset from 1.99% to 6%, and their
repayments had climbed hard. They wanted to consolidate but couldn’t
borrow more through a traditional lender.
A $500K second mortgage did the reset: $100K cleared the credit
cards, $300K paid down the primary mortgage to lower monthly repayments,
and $100K went into offset for flexibility. Same equity, far less
monthly pressure — with a plan to refinance and restructure within a few
years.
Expensive private debt. Another case: an Inner West
home worth $4.2M with a $1.7M mortgage, plus a $420K private loan taken
out during a business downturn and now nearing maturity. The bank
wouldn’t refinance the private debt while the business financials were
still recovering. A $700K second mortgage repaid the private lender,
knocked $230K off the primary mortgage, and left $50K in offset —
exiting an expensive facility without adding monthly payments.
The trade-off, stated plainly
Because these facilities usually have no monthly repayments, the
interest accrues and compounds against your equity until the loan is
cleared. That’s fine when there’s a genuine plan to refinance or sell
within a defined period. It’s not a tool for permanent borrowing.
The right question isn’t “can I get the money” — it’s “what’s my
exit, and does the maths work over that window.” That’s the part worth
getting right.
Where we come in
We look at the whole picture: what you owe, what it’s costing you,
where the equity is, and whether restructuring genuinely improves your
position or just moves the problem. If a standard refinance can do the
job, that’s the cheaper answer and we’ll steer you there. If it can’t,
we’ll show you what will.
Knocked back but sitting on equity? Let’s talk it
through — no jargon, just a clear read on your options.
Written by Jeremy Harper, Director of hFinance. I help
equity-rich homeowners restructure their lending when the servicing test
says no.
General information only, not personal advice. We’ll assess your
specific circumstances before recommending anything.