Home Equity Loan

A Home Equity Loan will allow you to unlock the equity in your home for cash to purchase another property, renovate your home, consolidate your debts, or even pay for lifestyle expenses such as buying a new car. This type of home loan is highly flexible and is therefore becoming increasingly popular in Australia.

Is Home Equity Loan Right for You?

A home equity loan is ideal for people who are responsible and disciplined in using their money. There are individuals who are releasing their home equity to spend on luxury such as sports car or even an expensive trip abroad. Spending your loan proceeds to have some fun is not necessarily a bad idea if you have a plan on how you can repay the money back.

In general, it is fairly easy to release your home equity up to 80% of your property value. There are even lenders who can unlock as much as 90% of your property value if you are willing to pay for Lender’s Mortgage Insurance or LMI. It is ideal to work with a professional mortgage broker who specialises in equity loans so you can determine if this type of loan is suitable for you.

Home Equity Line of Credit Explained

Most banks require their borrowers to setup a Line of Credit or LOC for a home equity loan. The interest rate is often higher compared to a conventional home loan because:

• the payment terms are more flexible
• interest may be capitalised
• interest-only terms may apply for up to ten years
• the proceeds can be accessed now through any ATM.

Mortgage brokers can often find other loan options, which offer some of the benefits of a home equity loan without the drawbacks.

How to Buy Investment Property

Here some handy hints to get you started in property investing:

1. Obtain independent financial advice
   Before investing in property, you should consider seeking independent financial advice from your accountant and/or financial planner. This will help you minimise your risk and maximise any possible benefit. (Express Mortgage Market cannot advise you on investment strategies)

2. Set clear investment goals and objectives
   Why are you investing? Are you seeking tax relief, or strong rental returns? Perhaps long-term capital growth is your priority? A clear objective will help you make a better property investment.

3. Research the property market
   The more information you have, the more likely you are to invest wisely. Make sure you feel comfortable investing in the geographic area and property type you’re considering.

4. Negative Gearing
   Many property investors benefit from tax savings through negative gearing – where the ‘return’ from rental income is less than the borrowing cost of the investment. The loss may then be used as a tax deduction. Consult your financial adviser to see if negative gearing can work for you.

5. Avoid property scams
   There have been some well-publicised cases where inexperienced, first-time investors – particularly those from interstate – have been overcharged by unscrupulous property developers. If an investment opportunity sounds too good to be true, it usually is.