Everything You Should Know About Home Equity Loans
A home equity loan is a type of loan where the borrower puts their own home up as collateral. Usually to purchase a second property or make renovations on their current property. Home equity loans are on the rise again in Perth, and many borrowers use this option to increase their property portfolio and make safe investments for their future.
Two Types of Home Loans
There are two primary types of home loans. a standard home equity loan and a home equity line of credit. The standard is just as it sounds – a lump sum paid to the borrower dependent on the application and the value of the home. Gaining a home equity line of credit means that the lender will authorise smaller sums on a case-by-case basis. This is up to a certain amount agreed upon initially.
What Type of Home Loan is Right for You?
The type of loan you should choose depends on what you are hoping to use the money for. If you want to invest in a new property or are hoping to carry out a large one-off renovation like replacing your roof or adding on a storey, the standard home equity loan is generally the best choice and is available in a fixed or adjustable rate loan. If you are doing a series of small renovations, or starting a new project that requires small bursts of money, the home equity line of credit will be perfect for your situation.
Advantages & Disadvantages of Equity Home Loans
So, what are the advantages and disadvantages of home equity loans. First up, home equity loans are a way to borrow that almost guarantees you will be approved. If your home has any value, a lender will allow you to borrow against it. They are also a great way to enhance your investment portfolio, or make those much-needed home improvements that won’t get done otherwise.
One thing to remember when applying for any type of home equity loan is that lenders aren’t partial to lending small chunks of money. So make sure you know what you are getting yourself into when you are looking at an amount to borrow. It’s also important to remember that at the end of the day, a home equity loan is a mortgage – and has to be paid back! However, interest rates can be a little lower on home equity loans to balance it out.
Think a home equity loan might be right for you.? Want to invest in a second property but aren’t sure if you have the funds available? Speak to Nicheliving Home Loans today to find out what your options are. You can also discuss the possibility of a home equity loan. We know how to find the best deal for you!