Many Australians own homes that are now worth far more than they still owe on their mortgages. With a home equity loan, you can unlock that “equity”.
What is home equity?
You’ll hear a lot about equity in relation to home loans. Equity is the difference between what your home is worth today and what you still owe on your mortgage.
Utilising your home equity
If your home is worth $400,000 and you only owe $100,000 on your mortgage, you have $300,000 in home equity. Previously, the only way you could utilise that equity was by selling your house. Now there is another way.
Home equity loan – unlocking home equity
With a home equity loan, the lender lets you borrow against the equity you have built up in your loan, normally up to 80% of the value of the property (subject in your borrowing capacity and property type). Let’s say you need money for your daughter’s wedding. You don’t have any ready cash but you do have equity in your home. A home equity loan is one of a range of possible solutions.
More commonly, we are helping our clients access the equity in their home to assist in purchasing an investment property. This can be a great way to accelerate your wealth, and we are able to help confirm your borrowing power, what the maximum purchase price you can afford, plus get you into a suitable and competitive product.
Home equity loan – a better interest rate
If you need money for other reasons, you could use a credit card or take out a personal loan. But you’ll probably get a better interest rate with a home equity loan because the loan security – your house – is strong in the lenders eyes.
One thing you need to remember with a home equity loan is that you may still need to make monthly repayments on the total loan limit, not just the balance. To learn more about home equity loans, contact one of Acceptance Finance’s Credit Advisors today.