Category: House & Home
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Sub category: Loan
2 March 2016

Home equity – a low cost alternative to a personal loan

Renovating a property to bring it up to date is often on the ‘to-do’ list for many homeowners – but finding the funds to make it happen can sometimes prove a challenge.

As an alternative to taking out a personal loan, you may be able to unlock a valuable resource in the form of home equity.

Home equity refers to the difference between your home’s current value and the balance of your home loan. For example,  if your property is currently valued at $800,000, and you have $500,000 of your home loan still to pay off, then your home equity is $300,000.

The residential property market in Australia has performed well in recent years, with the latest data from the Australian Bureau of Statistics (December 2015) indicating property prices across the nation’s state and territory capitals have risen by 10.7% in the year to September 2015 alone.  So, if you have been paying off your home loan for several years, then your equity could add up to a tidy sum.

A low cost funding option for your goals                                                                                           

One of the benefits of financing your goals through home equity rather than a personal loan is low cost access to funds.  The interest rate charged on a home loan is typically far lower than the interest rate charged on any short term debt.

So, if you’ve acquired home equity, then how do you access it? The first step is to talk to your lender to find out how much equity you can tap into, and whether it’s right for your needs. Depending on your circumstances you may be able to take out a variation on your home loan so you can invest the equity in other ways such as a renovation, your children’s education, or other lifestyle goals.

While increasing your home loan may be just what you need to achieve some of your goals, or to diversify your wealth building portfolio, consider whether you can comfortably afford the increased home loan repayments before you go ahead.

For specific advice tailored to your circumstances, consider speaking to a professional financial adviser.

The information is current as at publication. Any advice on this website does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. Deposit products, savings products, credit card and home loan products are issued by ING, a business name of ING Bank (Australia) Limited ABN 24 000 893 292, AFSL and Australian Credit Licence 229823. ING Living Super (which is part of the ING Superannuation Fund ABN 13 355 603 448) is issued by Diversa Trustees Limited ABN 49 006 421 638, AFSL 235153 RSE L0000635. The insurance cover offered by ING Living Super is provided by Metlife Insurance Limited ABN 75 004 274 882, AFSL 238096. ING Home and Contents Insurance is issued by Auto & General Insurance Company Limited (AGIC) ABN 42 111 586 353 AFSL Licence No 285571 as insurer. It is distributed by Auto & General Services Pty Ltd (AGS) ABN 61 003 617 909 AFSL 241411 and by ING as an Authorised Representative AR 1247634 of AGS. All applications for credit are subject to ING's credit approval criteria, and fees and charges apply. You should consider the relevant Product Disclosure Statement, Terms and Conditions, Fees and Limits Schedule, Financial Services Guide, Key Facts Sheet and Credit Guide available at ing.com.au when deciding whether to acquire, or to continue to hold, a product. Before interacting with us via our social media platforms, please take a minute to familiarise yourself with our Social Media User Terms https://www.ing.com.au/pdf/Social_Media_User_Terms.pdf.

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