Home Equity Loans
Home equity loans are a popular tool that can assist in leveraging off the current equity in your home or investment property to raise funds for various purposes.
Home equity loans are very flexible in their nature as they can generally be used for various purposes from purchasing further investment assets (investment properties, shares etc) but can also be used to funds cosmetic renovations on your home or be used to purchase personal goods (vehicles, boats, holidays) or even to consolidate debts (car loans, personal loans or credit cards).
What can I use a Home Equity loan for?
- Borrow up to 90% for further investment purposes into residential real estate
- Borrow up to 80% for further investment purposes into commercial real estate, to consolidate personal debts or for personal purchases (vehicles, holidays etc)
- Borrow up to 70% to consolidate tax or business debts (conditions apply)
- Not eligible to consolidate other debts with missed repayments, gambling debt or to fund repayments on other loan facilities (capitalising interest repayments)
Will I get approved?
- You’ll need to prove what you’ll be using the funds for (discuss these requirements with one of our brokers)
- You need a clear credit file and a perfect repayment history.
- Location restrictions apply (banks prefer capital cities, major towns or regional centres).
- Banks prefer standard property types like residential houses, townhouses, units or vacant land.
- You need to have stable employment and a regular income.
Interest rates from:
3.09% | 3.18%* p.a (Comparison Rate)
Good news! All our 34 lenders have Home Equity Loans available.
Discuss this with us today to find the right fit for your needs.
Discover if you qualify:
We can help you secure a home equity loan anywhere in Australia
What can I use a Home Equity Loan for?
Home Equity loans have a variety of uses which makes them one of the most flexible products in the lending landscape.
Having said that a banks attitude to cash out can also require additional verification as to what the funds will be used for.
Credit assessors are also alot more inclined to approve a deal where the cashout is used to further invest or increase the capital value of a property (as this strengthens the borrowers position) as opposed to using these funds for a holiday, car purchase or debt consolidation so it’s important you speak to us first before applying so we can advise on your best approach here!
Here are the options on the most common purposes for a Home Equity Loan:
Option 1: Further investments
- Borrow the equity to purchase investment property (rather than needing cash/savings)
- Borrow the equity to invest into managed funds or shares (will require a financial planning letter to confirm)
- You can also borrow this equity to purchase commercial property however conditions do apply and only certain lenders allow this
This is a great use of property equity and can quickly accelerate your propensity to build wealth.
Option 2: Property upgrades or renovations
- This can be used for cosmetic renovations and upgrades (new kitchen, bathroom, landscaping & more)
- Any amount of $50,000 will generally require trade quotes to verify use of funds
- Cannot be used for structural renovations or a full knock-down rebuild as this will need to use a construction loan product
If you require DA approval or are looking at an extensive addition/extension or re-build then find out more on this type of application through our construction loan page.
Option 3: Debt consolidation
- Can be used to consolidate credit cards, personal loans or car loan debt
- You’ll generally benefit with much lower repayments and lower interest rates on this debt
- Can also be used to payout tax and business debts (in certain circumstances, conditions apply. Speak to us today if this relates to you)
With using your equity for debt consolidation we usually recommend a shorter loan term for these amounts. This way you will benefit from the lower interest rate but won’t then be paying off these debts over a 30 year home loan term (which can actually end up costing you alot more in interest!).
Option 4: Personal purchases
- Can be utilised for a vehicle purchase whether that’s a work or personal car, boat or any other large asset
- Can also be used for a holiday or any other large personal expense
Similar to Option 3 – we generally recommend a shorter loan term for this type of Home Equity Loan so that the loan term matches the length of time you’ll be keeping the asset before replacement.
What are the benefits of a Home Equity Loan?
- Leveraging off the available equity will allow you to avoid paying cash (which can be hard to save and retain)
- This is a proven strategy to assist in rapidly accelerating wealth creation
- You can use this strategy as often and as freely as you please as long as you have the borrowing capacity available
Lowest funding costs
As you are securing your Home Equity Loan against residential property, the applicable rates and lender fees are generally far cheaper than any other method. You will also have a range of lender options to choose from to ensure you are shopping around correctly for the lowest funding cost option.
Sometimes, by utilising a Home Equity Loan you will be also increasing your overall aggregate borrowing with the lender and this will allow us as your broker to negotiate an overall large interest rate discount on both your Home Equity Loan and your existing home loan!
Flexible repayment terms & options
- You can elect for loan terms up to 30 years as a standard home loan (one of the longest loan terms available of any loan facility)
- You can also select to pay just the interest or principle & interest repayments to match your cashflow/budget position
- You can make unlimited additional repayments at no cost (on a variable rate product) giving you ultimate flexibility
What to be wary of with a Home Equity Loan
Extending the loan term
This is all well and good if you are using the Home Equity Loan for further investment (and is recommended).
However if you are using these funds for debt consolidation or to purchase personal goods (a car, boat, caravan, holiday etc) then you are potentially paying this debt off over 30 years as opposed to a standard car loan for instance which would force you to repay this over a 5 year term as an example.
Although the monthly repayments are alot lower and seem to be beneficial you will end up paying significantly more interest by just paying the minimum repayments as the loan term is 6 times as long!
Although this loan application may be only for a relatively small amount, it still needs to follow the exact same application and credit assessment process as a full purchase finance application, a refinance or any other home loan application.
This will mean that it may take the lender 2-3 days to assess the application, you may need to have a full valuation completed and then executing the mortgage documents and returning the originals could take another 5 days. You can expect the process to take up to 10 -15 business days.
This is generally not a deal breaker for an investor wanting funds for another property purchase but if funds are used to purchase a car then this is a stark contrast to a car loan application which can be approved same day and have this settled within 24 hours.
How do I calculate the amount of equity I can use?
Option 1: We’ll run a property report
- This is the easiest & quickest option
- Once we have discussed your situation and goals with you we can run an accurate Corelogic property report
- This will give you a guided value along with recent comparable sales in your area
These reports use metrics that the banks use to calculate the value of your property and are very accurate (especially in high turnover metro areas). This is the most accurate way before looking at a specific lender option to assess your available equity.
Option 2: Complete a bank valuation
- Once we’ve assessed your situation and provided you with our recommended lender solution
- We can generally run a lender valuation report upfront and at no cost
- This will give you a definite valuation figure and a confirmation of available equity, even prior to submitting the application
If you’d like to proceed with this option, please complete a Free Assessment Form and we can be in contact to discuss your situation with you.
Applying for a Home Equity Loan.
If you need advice on your refinance options, please speak to us!
We’ll give you a thorough overview of your position and the most competitive options available to you in the market.
Complete a Free Assessment Form to get started with our team today.