Did you know that you could use your home loan equity to help finance something else? For example, maintenance or renovations on your home; as a deposit for your next home or investment property; or even to improve your lifestyle such as purchasing a new car or go on a family holiday. At i Lend Finance Solutions, as experts in finance lending, we can help you if you’re ready to unlock the equity of your home loan. In this post, we share some info and tips when it comes to home loan equity.
Equity is the difference between the market value of your property and the amount you still owe on your home loan. For example, if your home is worth $500,000 and your outstanding $250,000, you have $250,000 of untapped equity.
HOW CAN YOU ACCESS YOUR EQUITY?
- Withdrawing extra repayments under a redraw facility or topping-up your loan. Consider a line of credit on your home loan. A line of credit acts like an overdraft facility and gives you ready access to funds up to an approved amount. Once you have paid off what you have borrowed or made extra repayments, you are able to redraw again from the line of credit. Think of it as like a second loan on top of your home loan – without the hassle of applying for another source of credit – and you can access funds anytime, such as over the phone, on the Internet and also at ATMs. But remember using the equity in your home means the total amount you owe on your home loan will increase, which can result in higher monthly repayments. There might also be restrictions on your home loan that can prevent you from making additional repayments or accessing the equity in your home.
- Refinance your home loan. If your circumstances have changed, or if you’ve had your home loan for a few years, you might want to consider refinancing. Under a new home loan you may find you can get more flexible features that allow for equity redraw.
- If you’re a pensioner or retiree you could take advantage of a reverse mortgage These home loans designed specifically for older borrowers who are typically ‘asset rich’ but ‘cash poor’. Reverse mortgages are the most popular form of home equity release in Australia. Interest is charged like any other loan, except you don’t have to make repayments while you live in your home – the interest compounds over time and is added to your loan balance. You remain the owner of your house and can stay in it for as long as you want. You must repay the loan in full (including interest and fees) when you sell your home or die or, in most cases, if you move into aged care.
HOW MUCH CAN YOU BORROW?
You could borrow anything from 50% or even 90% of your home’s value depending on the type of home loan. There might also be a minimum amount you can borrow. Just be cautious, knowing that it usually means it will take longer for you to pay off your mortgage.
HOW CAN YOU BUILD EQUITY IN YOUR HOME?
- Increase the value of your property by renovating your home.
- Reduce your loan balance by making more regular or larger repayments.
- Open an interest offset account, so your savings are offset against your loan balance, to reduce the interest you pay on your loan.
At i Lend Finance Solutions, let us help you work out the best option for you and take the guess work and time out of shopping around. As experienced finance lenders and mortgage brokers, we can compare interest rates and fees for you, while also making sure that you’re able to comply with a set of terms and conditions to suit your lifestyle and situation best.