Refinancing for Education: What Not to Do With Equity

Using your home equity to pay for study can work, but only if you treat the new debt as a short-term cost sitting on a long-term loan.

If you are a Long Jetty homeowner weighing up a course for yourself or your kids, the decision is rarely about whether you can get the money. It is about how you structure it so a few years of fees do not turn into decades of repayments.

Can You Refinance to Access Equity for Education?

Yes, you can refinance your home loan to borrow extra against your property and use the cash for study costs, if a lender agrees your loan amount suits your income and your property valuation supports it. Lenders must check that the loan meets your requirements and that you can meet repayments without substantial hardship.

Because you are adding to your debt, this is not a like-for-like switch. Lenders assess new borrowers' ability to repay at a rate at least 3 percentage points above the loan rate, and that buffer was confirmed by APRA as remaining at 3 percentage points on 28 May 2026. In practice, the extra borrowing is tested against your income, your other debts and the equity you hold.

If your balance after the top-up sits above 80% of the property's value, the lender may charge lenders mortgage insurance, which adds to the cost. A loan health check is a calm first step to see where your equity sits before you apply anywhere.

The Mistake of Letting Study Debt Run for 25 Years

The biggest trap is adding study costs to your loan and paying them off over the full remaining term. Extra borrowing is spread across the whole loan, so a short-term expense can become a long-term cost.

Consider a homeowner who wants to retrain and needs an extra $40,000 for fees and some time off work. Using the illustrative rate of 6.75% p.a., adding that amount to a loan with 25 years left costs about $276 a month in extra repayments. That looks light, but it keeps the debt going long after the course has finished.

To clear the same $40,000 in five years at the same illustrative rate, the repayment is about $787 a month. Most households will not want to carry that figure, so the sensible middle path is to choose a lower required repayment and add extra payments whenever cash flow allows. You can test your own numbers in our mortgage repayment calculator.

Splitting Your Loan So Study Costs Stay Contained

A split loan lets you place the study money in its own portion, so you can see it, repay it sooner and keep it apart from the rest of your mortgage. The trade-off is that you may end up with two rates or two repayment structures to manage.

In the example above, the homeowner keeps the original balance as it was and creates a separate $40,000 portion. They set the minimum repayment at the 25-year level of about $276 a month, then put in extra whenever they can. If they settle on roughly $500 a month during the course, that portion is repaid sooner than the minimum schedule and the debt is gone well before the main loan.

Some lenders also offer redraw or an offset account on part of a loan. Features like these can add flexibility, but they can come with extra fees, and a redraw facility can tempt you to spend money you have repaid. Ask which features come with which loan before you commit.

What Does a Refinance for Education Cost?

Refinancing can involve several costs, and they need to be weighed against what the extra funds will do for you. These can include a discharge fee on your current loan, an application fee on the new one and a valuation. If you are on a fixed rate, a break fee may apply when you leave early.

Break fees apply only to fixed rate loans, not to variable loans. If your fixed term is close to finishing, it can make sense to wait and review your options at fixed rate expiry instead of paying to leave early.

If you have less than 20% equity, lenders mortgage insurance may also apply. Compare the total costs against the benefit of the new loan, not just the interest rate.

Is a Personal Loan or Your Home Loan the Right Fit for Study Costs?

The right choice depends on how much you need and how quickly you can repay it. A home loan spreads repayments over a longer term. A personal loan has a shorter term, which can mean higher repayments but a clearer finish line.

For smaller amounts, a shorter loan may mean you pay less interest overall. For larger amounts, using home equity may be the only way to keep repayments manageable. Either way, check your borrowing capacity first so you know what a lender is likely to allow.

Tax Treatment of Interest on Study Borrowings

Interest on money borrowed for private purposes is generally not tax deductible, even when your home is the security. The ATO says the use of the borrowed money decides deductibility, not the property that secures it.

Whether study costs relate to earning income can depend on your situation, so speak to your accountant before you assume any tax outcome. A tax outcome is never certain, and our broker can work alongside your accountant.

Keep It Local and Talk It Through

If you live in Long Jetty, you can talk to a local mortgage broker on the Central Coast who can look at your loan, your equity and your plans together. A conversation before you apply can save you from borrowing more than you need, or from locking in a structure that does not fit your life.

If study is on your horizon, call one of our team or book an appointment at a time that works for you. We will review your current loan, talk through your options and help you decide whether to refinance, split or wait.

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