Australian Home Equity Loan
What is a Home Equity Loan?
A Home Equity Loan allows you to use the equity you have built up in your home as collateral for further credit and is characterised by flexibility and ease of use.National property prices in Australia have surged by more than 50% over the last 5 years giving many home owners substantial equity to borrow against - Equity is the difference between what you owe on your home loan and what the property is actually worth.
Home Equity loans are commonly used to retire high interest consumer debt, to obtain a deposit on an investment property, to renovate and increase the value of the existing home, or to purchase expensive items like a vehicle or boat.
There are 2 main types of Equity Loans. There is the lump sum cash type where you get a lump sum for a particular project or investment where you start paying interest immediately. There is also the Line of Credit type where you only pay interest on the part of the loan you have drawn down on. Refinancing your entire loan is a third possibility for accessing your equity.
Equity loans used wisely to invest in assets that appreciate in value can increase your wealth, but inversely can result in greater debt when applied to items that depreciate.
