Can you borrow extra on your mortgage for furniture?

It may be possible to borrow extra money on your home loan to help pay for furniture. However, this could mean paying more interest on your mortgage, potentially blowing out the cost of furnishing your home.

How can you access money from your home loan?

It may be possible to use the money from your mortgage to not only pay for your house and land, but other expenses as well, from making renovations or extensions to your property to buying furniture.

Some of these options could include: 

• Bundling extra expenses into your mortgage principal: Some lenders may allow you to bundle extra costs, such as Stamp Duty, fees, or Lenders Mortgage Insurance (LMI) into your mortgage balance when you first apply for a home loan. However, borrowing more money can mean your loan will take longer to pay off, costing you more in interest over time.
• Accessing your redraw facility: Making extra repayments onto your home loan can help to pay off your property faster, reducing your mortgage principal so you may be charged less interest. Your lender may allow you to redraw some of these extra repayments when you need the cash back in your bank account, such as when you’re going furniture shopping. However, this means the extra repayments will no longer affect your interest charges.
• Using your offset account: Money saved in your offset account (a bank account linked to your home loan) is included when calculating your interest charges. For example, if you owe $400,000 on your mortgage, but have $10,000 saved in your offset account, you’ll be charged interest as if you only owed $390,000. Money in your offset account can be accessed just as easily as from any other bank account, so it could be used to pay for furniture, though money you spend would no longer affect your interest.

Can you use your home equity to pay for furniture?

Another way to help pay for furniture in your home is to refinance your mortgage and access your equity in the property.

Your equity is how much of your property that you own outright, and doesn’t have a mortgage owing on it. You can find your equity by taking the current value of your property (including any capital growth or loss) and subtracting your remaining mortgage principal. You can grow your equity over time by making principal and interest repayments on your home loan, as well as extra repayments. And if property prices are rising in your area, you could also potentially benefit from capital growth.

Most lenders won’t let you access all the equity in your home, as they’ll want you to leave at least 20% of the property “unencumbered” (without a mortgage owing on it) to maintain the 80% Loan to Value Ratio (LVR) required to avoid Lenders Mortgage Insurance (LMI). You can find your usable equity by subtracting your outstanding mortgage principal from 80% of your home’s current value.

You may be able to access your usable equity when you refinance your home loan. This may allow you to “top up” your mortgage and borrow extra money, which you could use to purchase designer furniture, renovate your home, or even buy a car or go on holiday.

You could also access your equity to obtain a line of credit, which works a lot like a credit card with a maximum limit based on your usable equity. Your home equity could also potentially be used as security for a separate home equity loan in place of a traditional deposit.

Keep in mind that borrowing money to buy furniture means paying interest over time. Adding the cost of furniture to your home loan could mean you’ll be paying interest over a decades-long loan term, which could mean you’ll ultimately spend a lot more on furniture than the initial purchase price.

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