Refinancing with a top up can be a valuable tool for homeowners looking to leverage their home equity. In this blog post, we’ll delve deeper into what equity in your home means, how it works, smart ways to use this financial strategy, and important considerations to keep in mind.

Understanding Equity

Equity is the difference between the current market value of your home and the outstanding balance on your mortgage. Essentially, it’s the portion of the home that you truly own. As you make mortgage payments and the value of your home increases, your equity grows. This equity can be tapped into through cash-out refinancing, allowing you to access funds based on the value of your home.

What is refinancing with a top up?

Refinancing with a top up is a financial strategy that allows homeowners to refinance their mortgage and apply for a top up at the same time. It essentially replaces your existing mortgage with another bank and at the same time we apply for a top up. This strategy leverages the equity you’ve built in your home and provides you with funds that can be used for various purposes.

How Refinancing With a Top Up Works

Here’s a step-by-step breakdown of how cash-out refinancing typically works:

  1. Assessment of Home Equity: The first step is to assess the current market value of your home and determine the amount of equity you have. This is crucial in determining how much cash you can access through refinancing.
  2. Application and Approval Process: Your broker will help you apply for a refinance with a top up. The lender will evaluate factors such as your credit score, income, debt-to-income ratio, and the value of your home to determine your eligibility and the terms of the new mortgage.
  3. Closing and Funding: Once your application is approved, you’ll go through the closing process similar to a traditional mortgage. The new mortgage will pay off your existing mortgage, and the excess amount will be disbursed to you.

Smart Ways to Refinance With A Top Up

  • Home Improvements: One of the most common uses of a refinance with a top up is to fund home renovations or upgrades. Investing in your home can increase its value, which in turn boosts your equity over time. Consider projects such as kitchen remodels, bathroom renovations, or energy-efficient upgrades.
  • Investment Opportunities: Some homeowners use their top up to invest in real estate, shares, or other ventures that have the potential to generate additional income or build wealth over time. Before pursuing investment opportunities, it’s important to conduct thorough research, assess risks, and consider your long-term financial goals.

Considerations and Risks

While top ups offer flexibility and access to funds, it’s essential to weigh the considerations and risks associated with this financial strategy. Some key points to keep in mind include:

  • Costs: If you break a fixed term loan there could be break costs. This is where the bank charges you a fee to break out of the term. You also want to make sure that there is no cashback to repay. Most banks have a three year lock in term. Solicitor costs are another thing to factor in. They have to switch the mortgage and this normally costs around 1k.
  • Loan Terms: Understand the terms of your new mortgage, including interest rates, repayment terms, and potential penalties for early repayment. Compare different loan options to find the most favourable terms.
  • Financial Goals: Align your use of your top up with your long-term financial goals. Consider how the funds will contribute to your overall financial strategy and prioritise investments that align with your objectives.
  • Equity Preservation: Be mindful of preserving equity in your home. Avoid overleveraging or using all of your equity in one transaction, as this can increase financial risk and limit future options.

A refinance with a top up is a powerful financial strategy that allows homeowners to leverage their home equity and access funds for various purposes. Book a kōrero with us to explore your refinancing options tailored to your specific needs and circumstances.


Everything shared in this blog post is general financial advice. For financial advice tailored to you, please book a kōrero with us.