What is a home equity loan?

Are you a property owner looking for a large sum of money? If so, a home equity loan is an option you may explore.

No matter what the purpose of the funds, if your home is worth more than the outstanding balance owed, a home equity loan is something you can consider. You may wish to upgrade your current home, or even put down a deposit on that investment property you have been thinking about.

The use of home equity loans is vast for those looking to expand their property portfolio and for good reason. Major advantages include:

  1. Easier approval due to a previous endorsement and history with the lender.
  2. Low rates, making this product highly attractive to consumers. Unlike unsecured loans, home equity loans are secured, thus minimising borrowing costs.
  3. Borrowers can qualify for significantly larger amounts then they would be approved for without the security of a home, which is what makes this product so appealing for investors

Safe for lenders

Home equity loans are very advantageous due to being the safest products on offer by lenders.

In the event of unforeseen circumstances where you are unable to fulfill the repayments, the bank can recover any unpaid funds through selling your property. This is obviously the worst case scenario. However, this means that with the funds having the option of being easily recovered, lenders are safe to lend you the money through a home equity loan. With years of experience in the field, our home loan experts work to eliminate this threat and provide you with assurance and peace of mind you desire when purchasing a home.

Lump sum and line of credit

Within a home equity loan, there are two options available for consumers to choose from: a lump-sum and a line of credit.

While similar in some ways, these two options are tailored differently for separate needs. As indicated by their name, lump-sum home equity loans provide you with a considerable sum of money upfront and allow you to repay the loan within a fixed period through monthly repayments. Interest rates can be fixed or variable, which is where we will assist in making the correct decision by assessing the financial environment.

Compared to a lump sum loan where you apply for a set figure, a home equity line of credit (HELOC) approves you with a maximum amount of available credit, and you simply borrow as you need. You can borrow gradually from the line of credit as required, and reimburse through minor payments. To abolish the loan, you must make fully amortising payments.

After acquainting yourself with the advantages, you must be aware of the potential dangers home equity loans present which we will outline to you. A major pitfall of those who opt for home equity loans is if the funds are abused and not used for home improvements or investments. This would be a waste of equity, and we can show you how to truly capitalise on this product by being mindful and smart with your money, and put it towards growing more equity.

Not only will we be with you every step of the way, we care about the outcome as we pride ourselves on achieving the best possible result for our clients. Your success is our success, so supporting you to make the best financial decisions for you and your needs is of the utmost importance. For home equity loans, we will consider if it is the right option for you, tailor the most appropriate product and find the best lender suited to that product.