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Equity Home Loans
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What Is an Equity Home Loan?
An equity home loan allows you to borrow against the equity in your home. Equity is the difference between your property’s market value and the balance you owe on your home loan. If you’ve been paying off your mortgage for several years, there’s a good chance you’ve built up significant equity. You can use this equity to purchase a new investment property, renovate your existing home, or even for other financial purposes.
For example: If your property is worth $1,000,000 and your loan balance is $400,000, you have $600,000 in equity.
Which Factors Should I Consider When Estimating Property Equity?
To calculate your available equity, you’ll need to know two key figures:
- Market Value
The market value is the price your property could sell for in the current market. Factors influencing market value include local market conditions, location, property size, and any unique features (e.g., views, recent renovations, etc.). The rate of increase in your property’s value will depend on these elements and broader market trends. - Loan Balance
This is the remaining amount you owe on your mortgage.
Once you have the market value and the loan balance, you can estimate your equity by subtracting the loan balance from the property’s market value. For instance:
- Property market value: $1,000,000
- Loan balance: $400,000
- Equity: $600,000
Important:
The above example shows the equity available. However, lenders will typically only allow you to release equity up to a certain amount (capped at their LVR limit and/or dollar amount limit).
Our experienced mortgage brokers can help you assess your situation and provide tailored solutions based on your equity and overall financial profile.
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How Can I Build My Equity?
The more equity you have, the better positioned you are financially. Here are some ways to build equity in your property:
- Make additional repayments: Paying more than the required amount each month reduces the loan principal and accelerates equity growth.
- Increase monthly repayments: You can choose to increase your regular repayments to pay off your loan faster and reduce interest over time.
- Switch to fortnightly or weekly repayments: This can save you interest over the life of the loan, as you make more frequent repayments.
- Renovate your property: Improvements like updating kitchens or bathrooms, adding extensions, or enhancing street appeal can increase your property’s market value and, in turn, your equity.
- Link an offset account: By linking an offset account to your mortgage, the balance in the account reduces the interest charged on your home loan, helping you build equity faster.
How Can I Access My Equity for a Loan?
Here’s how you can access your home’s equity:
- Estimating Available Home Equity
First, estimate your equity by subtracting the remaining loan balance from your property’s current market value. Our mortgage brokers at Zenith can assist you in accurately calculating your equity and help you understand your borrowing potential. - Determine How Much Equity Is Accessible
Most lenders will allow you to borrow up to 80% LVR (loan-to-value ratio) of your property’s value. In some cases, they may approve borrowing up to 90% LVR, but you’ll need to pay Lender’s Mortgage Insurance (LMI) if you exceed 80% LVR. Your financial capacity and ability to meet repayments will also influence how much equity you can access. Lenders will need to assess your ability to manage additional debt. - Choosing the Best Loan Options
Once you know how much equity you can access, we’ll help you explore loan options from our panel of over 50 lenders, including banks and non-bank lenders. We’ll compare interest rates, features, and fees to find the best deal for your unique situation. - Identify Other Fees and Costs
When accessing home equity, there may be additional costs such as application and valuation fees. Our mortgage brokers will outline all potential fees so that you understand the full financial picture before proceeding.
Yes, you can borrow against your home equity to fund the purchase of an investment property, make renovations, or consolidate debt. Many homeowners use equity loans to leverage their property for further investments, enabling them to grow their wealth.
Working with Zenith allows you to benefit from decades of experience in the industry, helping you access the best equity loan options for your situation. We provide tailored home loan solutions that maximise your available equity and ensure you make well-informed decisions that align with your financial goals.
Refinancing or topping up your existing loan to access equity depends on your financial circumstances and long-term goals. If refinancing is necessary, we’ll help you determine whether this is the best option for your situation and whether it aligns with your investment and financial objectives.
Book an appointment with our specialist brokers to discuss your options. We will assess your financial position and provide tailored advice to help you unlock the full potential of your home equity.
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Having encountered thousands of different scenarios, our team is well equipped to find you suitable solutions. Having the right mortgage broker by your side is essential to ensure you are getting the absolute best deal for your unique situation.
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We understand everyone’s circumstances are different and we take the time to understand you and your goals. We value forming lifelong relationships with all our clients and we are fully committed to adding value every step of the way.
We know that mortgages can sometimes be complex and hard to understand. We focus on simplifying the process for you and we treat your loan as if it were our very own. Let us do what we do best so there’s one less thing for you to worry about.
Frequently Asked Questions
Using a mortgage broker like Zenith can help simplify the whole home loan process for you. We offer expert advice on loan products tailored to your unique situation. We save you time by doing the legwork, comparing options, handling paperwork, while also negotiating better terms and identifying potential hidden fees. Since we are not tied to any one lender, we can select the best loan suited to your needs, ensuring you get the most appropriate deal. Additionally, we proactively review your interest rate multiple times per year, ensuring you are on the most competitive rate possible.
There are no fees for our services. We get renumerated by the lender of your choice after your loan settles.
Different lenders have different lending criteria and requirements that you must meet before they lend you money. We take time to analyse your credit file, income situation, strengths and weaknesses of your financial situation, and much more, to find you the most suitable lender and loan package.
As a first step, we will need to understand your goals and objectives, and then collect and review all supporting documents. Once we have enough details to make a recommendation, it will then be up to the chosen lender’s turnaround time. This could be weeks to months, which is why we always recommend getting the process started as soon as possible, especially for property purchases.
Sometimes you may not qualify to get finance from a particular bank. Once we have assessed your situation, we will be able to find you the lowest rate possible from eligible lenders. Interest rates are only part of the equation, we’ll help you take into account all other fees and features so you can make an informed decision.
Most lenders require that you have minimum of 5% deposit of the property’s purchase price before taking out a home loan. However, in certain situations, this deposit can be lower. The maximum amount is up to you. Remember that you may have to pay Lender Mortgage Insurance (LMI) if your deposit is less than 20% of the property’s price, unless you qualify for an LMI waiver. Contact us to explore your options.
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