Complete Guide to HELOC loans in Australia

 

What is a HELOC Loan?

A HELOC loan most commonly referred to in Australia as an equity loan is a type of home loan were someone can access the value in their property to borrow against.

The term HELOC is not often associated with Australian banks and new loan applications as it is a term often used in the USA.

What is Equity?

Home equity represents the difference between your mortgage balance and your home’s market value. It reflects the portion of the property that you truly own.

As you continue to make mortgage payments and the property’s value appreciates, your home equity typically grows.

Essentially, home equity is calculated as the current market value of your home minus any outstanding debts, such as mortgages.

It serves as a valuable asset that can be leveraged to address financial needs, such as consolidating high-interest debt, using it to purchase another property or renovating your home.

If you’re considering such loans in Penrith, consulting with a mortgage broker in Penrith can help you navigate the options available to you.

How Can a Home Equity Loan Help You?

Home equity loans can support in the following areas:

1. Flexible Borrowing: Allows you to borrow up to the limit of the value of your property and keep aside for when you may need access to extra funds or emergency money.
2. Home Improvements: Often people use their equity to complete renovations to their home improving the property and further increasing the available equity in the home.
3. Debt Consolidation: Equity can be used to also pay off any high interest loans held reducing the overall interest paid and monthly contributions made.

Is Refinancing to Get an Equity Loan Worth It?

Refinancing to obtain an equity loan can be beneficial if:

• Debt Consolidation: Refinancing to consolidate high-interest debts, such as credit card balances or personal loans with your equity, into a single mortgage can reduce the overall interest paid and monthly contributions made.
• Lower Interest Rates If you haven’t reviewed your loan in some time you may find when applying for a new loan you could benefit from an additional interest rate discount. Banks often provide higher discounted rates on lower risk loans. So, with your equity having increased there is a better possibility for further rate reductions even if not borrowing anything in additional too your current balance.
• Home Improvements: Your home equity could provide you with the options to finally complete those home renovations by tapping into the value of the property and borrowing against it to complete the works you’ve been meaning to do.
• Investment Opportunities: Home equity can also be used for investment opportunities. This allows you to avoid having to save a cash deposit for the next purchase as you can leverage the equity in your home to purchase another property or have funds available to invest in other prospects.

However, there are also potential downsides:

• Cost of Refinancing: Be aware of the fees associated with an equity refinance, such as application and valuation costs, and any potential break fees for early mortgage termination. Calculate these expenses to determine if refinancing is financially beneficial.
• Impact on Loan Term: Refinancing often resets your mortgage term, which can extend the loan duration and increase the total interest paid. Consider how an equity refinance can affect your long-term financial plans.
• Credit Score Impact: Each equity refinance application results in a hard inquiry on your credit report. Frequent and multiple application submissions may cause a poor credit score. Dealing with an experienced broker who understands the complexities of loan applications can keep the number of applications submitted to a minimum and in turn keep your credit score maintained.

It’s crucial to weigh these factors and consult with your mortgage broker to determine if the product is suitable to your situation and aligns with your long-term financial goals.

 

How can Freedom Finance Group help !!!

With over 15 years of industry experience, our Managing Director, Con Nicolaou, has helped countless individuals access the equity in their home.

Con is dedicated to guiding his clients through every step of the process, offering a detailed, step-by-step guide from start to finish. As experienced Mortgage brokers in Sydney, Con is committed to helping you meet your financial goals.

He will find the loan that best suits your needs from a panel of over 40 lenders and explain all the benefits and associated costs.

Con will also handle all the paperwork promptly, ensuring a smooth and stress-free settlement. Refinancing a loan can be overwhelming, but with Con and the Freedom Finance team, we’ll make the process simple and easy.

To book an appointment click here!!!