An equity release, also known as a top-up loan, is a loan that is added on to your current mortgage. Not all reasons for wanting to release equity from your home are acceptable. Lenders accept the following reasons as valid:
- Investing: buying another property, buying a business, purchasing shares in a business or investing in your own home by performing minor renovations.
- Purchases: holidays or cars
- Consolidating debt
How much equity is released?
The equity that you can release from your home depends on the lender, the equity available, your loan to value ratio and your finances. In general, the minimum amount you can add to your mortgage is between $10 and 20 thousand. However, your lender will decide the maximum amount you can release.
Application process
A separate application is required, but you will not need to supply all the documentation that was needed for the first mortgage loan. If you are applying for a standard release of $10,000 or more, supplying the lender with your last few payslips and a group certificate is all that is needed. Occasionally, a lender will ask you to supply evidence for the intended purpose of the release. Normally, the following documents may be needed:
- If you are buying property, you can provide a letter confirming you are searching from your conveyancer. If you have bought a property, you can provide a copy of the sale contract.
- If you want to consolidate debt, you can provide your bank statements from the last few months as evidence of regular debt payments.
- If you want to renovate your home, you can provide building contracts and copies of the contractor’s quotes and specifications.
- If you are investing or purchasing shares, your financial planner can write a letter or draw up a financial plan.
The lender will then perform a property valuation to determine how much equity you have before approving your loan.
Mortgage House is Australia’s largest independently owned non-bank lender that is committed to ensuring our customers’ needs are met. We want to provide our customers with the tools and knowledge they need to understand the financial aspect of homeownership. Our team of brokers can help find you the best top-up loan options that reflect your needs.
