For those who aren’t too familiar with the term, a top-up home loan allows homeowners to access the equity accrued on their home without having to sell the property first. Once you have access to that money, you can then use it to fund a number of things such as home improvements, essential repairs or purchasing a car.
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Equity is the difference between the market value of your property, and how much you still have left to pay on your home loan.
For example, if your home is worth $800,000, and you still have $500,000 left to pay on your home loan, then your equity will be $300,000.
If the value of your home increases to $1,000,000 over the next 10 years, and you’ve continued making payments on your loan so that you now only owe $300,000, then the equity you hold on your home will increase to $700,000.
Through a home loan top-up, the amount of money you can borrow by guaranteeing against your home, depends completely on how soon you’ll be able to pay off your loan (in other words, your financial stability), and the value of your home. Your lender will likely have your property valued by a professional, so be prepared if their evaluation doesn’t match up to what you expected the value of your home to be.
If you’re looking to top up your home loan, you should also be prepared to pay the following fees:
Since you’ll pay more interest over the life of your loan as a result of topping up, you should consider asking one of our Home Loan Specialists for advice before you decide to borrow against your home, that way you’re aware of all your options and risks.
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The purpose of a top-up home loan is quite simple. Once you meet the criteria set out by your lender, you borrow money against the equity in your home.
Top-up home loans can be very useful. Since interest rates on home loans tend to be lower than those of car loans or personal loans, borrowing money through a top-up home loan from a bank or lender in Australia, can mean you’ll likely pay less in interest.
As borrowing through a top-up home loan offers flexibility in refinancing, the funds can be used on a wide variety of expenditures such as:
It’s worth consulting with a Home Loan Specialist before you decide to top-up your home loan, as the process is not entirely risk free. Keep in mind that your loan repayments will increase following a top up and your interest will be calculated daily on a larger principal amount.
Want to know more about top-up home loans? Contact our team of Home Loan Specialists today and find out if it’s right for you.
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