Do you know how to refinance for education costs?

Refinancing to access equity can cover tuition fees, postgraduate qualifications, or school fees without requiring a separate personal loan at a higher rate.

Barristers often face substantial education costs, whether funding a Masters of Law, overseas professional development, or private school fees for children. Accessing equity through a home loan refinance converts these expenses into a debt secured against property rather than unsecured consumer credit, typically at a lower interest rate. The decision centres on whether the amount you need justifies the refinance process and whether your current loan structure is already working against you.

How equity release through refinancing works

You borrow against the increased value of your property above what you currently owe. The lender orders a valuation, calculates your available equity, and advances the additional funds at settlement. The refinanced loan amount includes your existing debt plus the equity release, all secured by the same property.

Consider a barrister who purchased a property several years ago for $950,000 with a loan of $760,000. The property is now valued at $1,200,000, and the loan balance sits at $680,000. Borrowing up to 80% of the current value would allow a total loan of $960,000, releasing $280,000 in usable equity. After costs, that could cover postgraduate tuition at a Melbourne or Sydney university, or several years of school fees, at a variable rate rather than an education loan rate that might sit several percentage points higher.

When refinancing makes sense for education funding

The equity you release should represent a meaningful amount relative to the costs involved in refinancing. Application fees, valuation fees, discharge fees from your current lender, and potential settlement costs can total several thousand dollars. If you only need $20,000, a redraw facility on your existing loan or a smaller personal facility might be more proportionate. If you need $80,000 or more, and especially if your current loan lacks an offset account or sits on a rate you could improve, refinancing solves multiple issues at once.

Your loan-to-value ratio after releasing equity also matters. Lenders typically allow up to 80% without requiring lenders mortgage insurance. If your property has appreciated and your loan balance has reduced, you may sit comfortably within that threshold. Pushing beyond 80% triggers LMI, which adds a capitalised premium that may not justify the equity access. Some lenders offer LMI waivers for lawyers in specific circumstances, particularly for barristers with strong income profiles, but this depends on the lender's current policy and your individual position.

Tax treatment of education-related equity release

Interest on funds borrowed for income-producing purposes is generally tax-deductible. If you are funding a postgraduate qualification directly related to your current income as a barrister, the interest component may be deductible. If you are funding school fees for dependents, it is not. Structuring the loan with a split facility allows you to quarantine the deductible portion from the non-deductible portion, which matters when you later want to claim deductions or refinance again.

A barrister funding a $60,000 Masters program while also releasing $40,000 for school fees would benefit from splitting the refinanced loan into two accounts: one for the tuition, one for the fees. The interest on the $60,000 portion may be deductible if the qualification maintains or improves skills directly connected to current assessable income. The $40,000 portion would not be. Mixing them into a single loan account creates an apportionment problem that your accountant will need to unravel each year. Splitting at the outset avoids that.

Fixed versus variable rate structures after refinancing

Locking in a fixed rate provides certainty over repayment amounts, which can suit barristers managing chambers expenses and irregular income timing. Fixed rates typically restrict additional repayments and prevent redraw, so if you anticipate needing further flexibility, a variable rate or a partial fix may be more appropriate. Coming off a previous fixed rate period often coincides with the need to refinance for other reasons, including accessing equity, so the timing can align naturally.

If you refinance and take a portion of the new loan on a fixed rate, ensure the education-related component sits on the variable portion if you expect to make lump sum repayments from chambers income during the year. This preserves the tax-deductible debt on variable terms where extra repayments do not trigger break costs, while the non-deductible portion can sit on a fixed rate if that provides budgeting comfort.

Offset accounts and cash flow management

An offset account attached to the refinanced loan reduces the interest charged on the outstanding balance without requiring you to park funds inside the loan itself. For barristers with fluctuating chambers income or holding trust funds temporarily, an offset account means every dollar sitting in the linked transaction account reduces the daily interest calculation. If your current loan does not include an offset, refinancing to access equity and gain that feature can deliver a double benefit.

The difference between offset and redraw matters for tax purposes. Redraw involves pulling money back out of the loan, which can compromise deductibility if the original purpose of that debt was income-producing. Offset keeps the funds separate, so the loan balance and its purpose remain unchanged. If you are refinancing partly for the equity and partly to improve loan features, prioritise lenders offering a full 100% offset on variable balances.

Serviceability assessment for equity release

Lenders assess whether your income can service the increased loan amount, not just whether equity exists. Barristers often show variable income across financial years, especially in the early years at the bar or during periods of chambers transition. Lenders will average your income over two years of tax returns, and some will also consider your most recent notice of assessment or a profit and loss statement if your most recent year shows an increase.

If your assessable income has risen in the past twelve months but your most recent tax return does not yet reflect it, providing a letter from your accountant and a year-to-date profit and loss can support the application. Lenders experienced with barristers understand the income pattern and will assess accordingly, but you still need to demonstrate that the new loan amount is serviceable under their criteria. If you are also carrying chambers debt or a motor vehicle lease, those commitments reduce your borrowing capacity and may limit the equity you can access even if the property value supports it.

The refinance application process for equity release

The lender orders a valuation once your application is lodged. If the valuation comes in lower than expected, the amount of equity available for release reduces. This can happen in markets where recent sales data is limited or where your property has unique characteristics that do not compare directly to recent transactions. In that scenario, you may need to adjust the amount you release or provide additional documentation to support a higher valuation.

Settlement occurs when the new lender pays out your existing loan and advances the additional equity. The funds are typically transferred to your nominated account on the same day. If you are using the equity to pay tuition or school fees, confirm the payment schedule with the institution so you can coordinate settlement timing. Some universities require payment by a specific date for enrolment to be confirmed, and delays in settlement can create complications if you are relying on the refinance to meet that deadline.

Call one of our team or book an appointment at a time that works for you to discuss your refinance options and the specific equity available in your property.

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