Turning Your Home Into an Investment – Refinancing When You Move Out

Turning Your Home Into an Investment – Refinancing When You Move Out

If you’re planning to move into a new place but keep your current home, refinancing can help you turn your property into a strong investment. Whether you’re upgrading, relocating or downsizing, restructuring your loan at the right time can improve tax efficiency, boost cash flow and open the door to future wealth-building opportunities.

This guide walks you through how refinancing works when converting your home into an investment property.

1️⃣ Why Convert Your Home Into an Investment?

Many homeowners choose to keep their existing property because:

• It’s in a good rental area.
• It’s growing well in value.
• Rental income helps cover the mortgage.
• It builds long-term wealth without needing to sell.

But before renting it out, your loan structure needs a tune-up.

2️⃣ Why Refinancing Before You Move Out Is So Important

Once your home becomes an investment:

• Your loan interest may become tax-deductible.
• Your cash flow relies on rental income.
• Your loan structure affects your long-term wealth.

The key rule?
It’s much easier to set up your loan correctly before you move out.

3️⃣ Loan Structure Matters More for Investments

When converting to an investment loan, consider:

• Offset accounts: Crucial if you want to keep personal savings separate.
• Interest-only vs P&I: IO improves cash flow; P&I builds equity.
• Splitting the loan: Helps manage tax-deductible vs non-deductible debt.
• Redraw clarity: Mixing personal and investment funds can cause tax issues.

Refinancing lets you cleanly restructure your loan before renting it out.

4️⃣ How Equity Release Helps Fund Your Next Move

If you’re buying a new home, refinancing can help you unlock equity in the old one.

• Use the equity to fund your new deposit.
• Avoid selling in a soft market.
• Boost your overall borrowing power.

This is one of the biggest advantages of keeping your existing home as an investment.

5️⃣ Cash Flow Changes When You Become a Landlord

It’s important to forecast:

• Your expected rental income.
• Your new home’s repayments.
• Investment property expenses (rates, insurance, maintenance).
• Vacancy periods.

A refinance can help balance cash flow and ensure you’re not overstretching.

6️⃣ What Lenders Look For in an Investment Refinance

Lenders assess:

• Your income stability.
• Your rental income estimate (from a rental appraisal).
• Your overall equity position.
• Your capacity to hold two properties if upgrading.

Investor-friendly lenders may use higher rental income shading, improving your borrowing capacity.

7️⃣ Why You Should Avoid Using Redraw for Your New Home Purchase

If you’ve been making extra repayments on your current home loan, that money sits in redraw.
But using redraw to buy your new home can:

• Mix personal and investment debt.
• Reduce tax deductions.
• Create long-term tax complications.

Refinancing helps you shift these funds into the right structure before moving out.

8️⃣ Should You Switch to Interest-Only?

Interest-only suits many investors because:

• Repayments are lower.
• Cash flow improves.
• You can focus on reducing your new home’s debt first.

But IO isn’t always the answer — depending on your long-term strategy and risk tolerance.

9️⃣ When Keeping Your Home as an Investment Makes Sense

It’s often a smart strategy when:

• The property has strong rental demand.
• You believe it will grow in value long-term.
• You want to build a property portfolio.
• You prefer not to sell in a weaker market.

A refinance helps set up the numbers to make this viable.

🔟 The Smartest Way to Convert Your Home Into an Investment

A broker can help you:

• Restructure your loan for tax efficiency.
• Access equity for your next purchase.
• Choose between IO and P&I based on your strategy.
• Find investor-friendly lenders with strong rental policies.