Home equity is calculated by subtracting the amount you owe on your home loan from the value of your property. The more of the home loan you have repaid, the more equity you have. You can apply for a home equity loan if you want to borrow some of the equity. There are many ways to use this equity.
Uses
Most lenders don’t care how you use the equity in your home. As long as the reason is worthwhile and not illegal, your loan is small enough and you pay back the equity, you can use the equity for any purpose you want. The most common are:
- Purchasing another property
- Buying or investing in a business
- Investing in stocks or business shares
- Consolidating your debts
- Purchasing a big-ticket item, such as a boat or car
- Renovating your current home or building a new one
- Paying for a holiday, wedding, medical expenses or school fees
- Having extra money on hand in case of a challenging financial situation
Proof of purpose
As mentioned above, depending on the purpose of your loan, you may have to provide proof of its intended purpose. If you are buying shares or property, consolidation debt or performing renovations, you may have to provide your lender with the required documentation. Their application should tell you all the documentation you need.
Some banks may be reluctant to approve you for an equity loan unless it is a line of credit. If you apply for a “cash-out” loan, a one-off, lump-sum payment, you may be limited in how much you can borrow. If you are considering applying for an equity loan, the mortgage brokers at Mortgage House can help. We have dedicated brokers specialising in equity loans. We can find the right home equity loan for you based on your situation.
