Home Equity Loan
Home equity loans are excellent for certain people who want to borrow against the equity they have built up in their family home and use the money to fund renovations, vehicle purchases, holidays, the deposit on an investment property, living expenses or something else.
As you know, as time goes by the value of your home increases while at the same time, the debt on your family home decreases as you make those mortgage repayments. The difference between the increased value of your home and the debt on your home is known as equity. Financial institutions will allow you to access a certain amount of that equity via a home equity or home equity line of credit loan.
How a Home Equity Loan works
The lender will arrange an official valuation of your home to determine its value. They’ll then lend up to a certain percentage of the value of your home. These additional funds will be set up as a revolving line of credit. In other words, the money is sitting there available for you to spend on whatever you like. If you spend it, you make monthly mortgage repayments to repay it. If you don’t spend it there are no extra repayments to make. The more you spend, the higher your home loan repayments will be, naturally.
The loan repayments on a home equity loan often only cover the interest that is being charged. If you want to reduce the debt you need to pay extra amounts. But the great thing is, as you reduce that loan balance the monthly interest is lower, which means you reduce your monthly interest payments and extinguish your debt faster. Then – at some point in the future if you feel you need to access a lump sum again for some reason, you can then redraw it from your mortgage and start again.
You may have heard news stories about people who are able to pay off their entire mortgage in a handful of years. These people use a line-of-credit loan coupled with an offset facility and credit cards with a long interest-free period, to do that.
Most financial institutions have a home equity loan mortgage product (also known as line of credit or equity access loans). Most too most come with a variety of bells and whistles including ATM access, cheque book, offset accounts and more. Talk to your Wealth Concerns Mortgage broker and we can help you identify which home equity loan is right for you based on your individual financial goals..
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If you would like to discuss your specific circumstances call us on 1300 700 496 or alternatively text your name and number to 0411 320 962 and we will call you.