Equity Release
Equity Release
Equity Release is a term used to describe a loan that enables homeowners to borrow additional funds on top of their current mortgage by accessing equity (or taking ’cash out’) from their existing home. The new loan amount is added to the remaining balance of the existing mortgage or added as a separate ‘top up’ loan.
How does it work?
When you apply to release equity from your existing property, your lender will assess your property's current value and your remaining mortgage balance. If your property has grown in value since you purchased it (or since your last appraisal/valuation), or if you have paid a sum off the mortgage, you may have built up equity. The lender will assess your current financial circumstances, and if they consider the amount you would like to borrow as affordable, they can then approve a new loan amount made up of your existing mortgage balance plus the additional equity you want to access.
Once approved, you receive the funds, which you can use for various purposes such as home renovations, debt consolidation, investment opportunities, or other financial needs that the lender approves. Keep in mind that the new loan terms, including interest rates and repayment terms, will be based on your current financial situation and the lender's criteria.
What are the benefits?
- Consolidate Debt: You can use the cash to pay off high-interest debts, such as credit cards or personal loans, potentially saving money on interest payments.
- Home Improvements: The funds can be used for home renovations or upgrades that can increase your property's value and enhance your living space.
- Investment Opportunities: Use the cash for investment purposes, such as purchasing additional properties, stocks, or other assets.
Things to consider first
- Interest Rates: Equity release loans may have higher interest rates compared to standard mortgage refinancing. Evaluate the new interest rate and how it affects your overall loan cost.
- Loan Terms: Understand the terms of the new loan, including repayment schedule, fees, and any penalties for early repayment or default.
- Financial Goals: Assess whether accessing cash from your home equity aligns with your long-term financial goals and risk tolerance.
It’s essential to weigh the benefits against the potential costs and risks before releasing equity from your property.
Consult with a financial advisor and/or mortgage specialist to look at your options, understand the implications of a cash-out loan on your finances, and make an informed decision that aligns with your goals.
Priority Home Loans Newcastle
P: 02 4967 5256