One of the most common questions I get from established commercial property owners isn’t about buying or selling. It’s some version of: “I’ve owned this place for years, it’s worth a lot more than I owe on it, can I actually use that?”
The answer is usually yes. If your commercial property has grown in value while your loan balance has fallen, you’re sitting on equity, and a refinance can turn that paper gain into usable capital without you selling a thing. I’ve arranged this for owner-occupiers funding an expansion, investors buying their next property, and business owners who simply needed working capital on better terms than an unsecured loan would offer. In this guide I’ll explain how commercial property equity release actually works in Australia: how much you can access, what you can use it for, what it costs, and the situations where it genuinely stacks up.
What does releasing equity from commercial property mean?
Equity is simply the gap between what your property is worth today and what you still owe on it. If your warehouse is valued at $2 million and your loan balance is $1.1 million, you hold $900,000 in equity on paper.
Put simply, releasing that equity means refinancing your existing loan into a larger one and taking the difference in cash. This is often called a cash-out refinance. It means you keep the property, you keep trading from it or leasing it out, and you walk away with capital you can put to work elsewhere. The mechanics are the same as a standard commercial property refinance, with one extra step: you’ll need to get a fresh valuation to confirm what the property is worth now, because that figure sets how much you can release.
Let me be clear about why this is possible at all. Equity grows two ways: you pay down the loan, and the property appreciates. The Reserve Bank’s most recent Financial Stability Review noted that fundamentals have continued to improve across most Australian commercial real estate markets, so many owners who bought several years ago are holding more equity than they realise.
How much equity can I actually release?
Here’s where I see a number of owners get caught out. The equity on paper is not the equity you can access. The lenders we work with won’t let you borrow against the full value of the property, they lend up to a maximum loan-to-value ratio (LVR), and your accessible equity is whatever sits below that ceiling.
For commercial property, that ceiling is typically around 70 to 80% depending on the property type, the lender, and how the property earns. The working example below shows how it plays out:
| Step | Amount |
|---|---|
| Property value today (new valuation) | $2,000,000 |
| Maximum borrowing at 75% LVR | $1,500,000 |
| Less your current loan balance | $1,100,000 |
| Equity you could release | $400,000 |
So while there’s $900,000 of equity on paper, the usable figure here is $400,000, the room between your current loan and the lender’s LVR cap. Push for a higher LVR and you can release more, but the rate usually rises and the lender’s serviceability checks get tighter. Our cash flow calculator is a useful way to sense-check whether the larger repayment still works against your income before you commit to a number.
What can you use released equity for?
This is where it gets interesting, because the range of uses I see our clients funding is wider than most owners expect. These are the ones I structure most often:
| Use | Typical owner | Why equity release suits it |
|---|---|---|
| Buying the next property | Investors growing a portfolio | Released equity funds the deposit on the next purchase, no need to sell the first |
| Business expansion | Owner-occupiers | Fit-out, new equipment, new premises or staff, funded against the asset you already own |
| Renovating or improving the property | Both | Upgrades that lift the property’s value or rental appeal |
| Working capital | Business owners | Often cheaper than unsecured finance, because the loan is secured by property |
| Consolidating other debt | Both | Rolling higher-rate facilities into one lower-rate, property-secured loan |
The investor case is the most common one I see. If you own one commercial property that’s grown in value, releasing equity is frequently how the second purchase gets funded, the equity becomes the deposit, and you’ve grown the portfolio without selling the original asset. If that’s your path, our commercial property investment loans page covers how the next purchase is structured.
One important distinction on working capital: if you’re releasing equity purely to fund business operations rather than property, a business loan or line of credit is sometimes the cleaner structure. I’ll always flag when one of those fits you better than a property refinance, because the right tool depends on what the money is actually for and how long you need it.
What does it cost to release equity?
Equity release carries the same costs as any commercial refinance, and the honest way to judge it is the saving or benefit net of those costs, not the headline rate. The main ones are:
- Valuation on the property, which sets your current LVR and therefore how much you can release
- Establishment fee on the new, larger loan, often a percentage of the loan and frequently negotiable
- Discharge fee from your current lender to release the existing mortgage
- Legal and documentation on the new facility
- Break costs, but only if you’re on a fixed rate and exiting early
That last one, the break cost, is usually the figure that decides whether to move now or wait, and it only applies to fixed loans. On a variable loan there’s typically none. It’s also the cost I most often negotiate down or get waived as part of placing the deal. The full breakdown of each cost sits on our commercial property refinancing page, which lays out what’s typically negotiable and what isn’t.
When does releasing equity make sense, and when doesn’t it?
Releasing equity is a genuinely useful tool, but it isn’t free money, you’re increasing your loan and your repayments. After hundreds of these conversations, the pattern is fairly clear.
It usually makes sense when: the property has grown meaningfully in value, you have a productive use for the capital that earns more than the loan costs, you’re holding the property for the long term, and your income comfortably services the larger loan.
It usually doesn’t when: you’re releasing equity to cover a short-term gap that a cheaper structure would handle, your serviceability is already stretched, or you’re planning to sell within a year or two and won’t have time to put the capital to work. In those cases I’ll tell you to wait or look at another option, because loading more debt onto the property for a use that doesn’t pay its way is a stress test, not a strategy.
The deductibility of interest also matters here, and it depends entirely on what you use the funds for. The ATO’s guidance on interest expenses is worth reading before you commit, and your accountant should confirm the position for your specific use.
How the process works, step by step
A commercial equity release runs much like a refinance, with the valuation doing the heavy lifting. In practice it looks like this:
| Stage | What happens | Rough timing |
|---|---|---|
| Assessment | We review your current loan, your goal for the funds, and your likely equity position | First 48 hours |
| Valuation | The new lender values the property, confirming current market value and your accessible equity | 1 to 2 weeks |
| Approval | The lender assesses serviceability on the larger loan and approves the cash-out | Within the valuation window |
| Settlement | The old loan is discharged, the new facility settles, and the released funds reach you | A further 5 to 7 days |
Most commercial equity releases run four to six weeks end to end, similar to a standard refinance, because there’s no purchase contract to negotiate. The single biggest accelerator is a strong, well-supported valuation, which is why we put work into presenting the property properly to the valuer.
The next step
If you’ve built equity in a commercial property and you’ve got a productive use for it, releasing it is can be one of the smartest moves available to you, and you don’t have to sell to do it. The question is always whether the numbers stack up for your situation, and that’s exactly what we work out before recommending anything.
As commercial loan brokers, we’ve arranged over $550 million in commercial finance for 3,300+ Australian businesses, and equity release is one of the most common reasons owners come to us. Take a look at our commercial property refinancing page for the lending detail, run your numbers through the cash flow calculator, or book a free consultation and we’ll tell you honestly what you could release and whether it’s worth doing.
📞 Phone: 1300 262 098
Disclaimer: This guide provides general information only and should not be considered financial or tax advice. Equity release through refinancing involves legal, tax and financial considerations that vary by individual circumstances. Always consult qualified professionals, including your accountant and a licensed finance broker, before making decisions about your commercial property finance.
