Looking for a home equity loan? Wouldn’t you agree that need to be certain that, when looking for a loan, you are getting the best home loan deal?
For starters, using a home loan repayment calculator simply won’t give you the full picture. You need to compare the best home loans carefully and be sure that you will qualify for a home equity loan in the first place.
As you probably know every lender has different qualification assessment criteria and just because you find some cheap home loans, it isn’t necessarily all plain sailing from there.
That’s where good home loan brokers come into their own. Later I’ll be showing you what to look out for when looking for the best equity home loans, so you can be certain to always get the best deal!
For now, let’s look at what a home equity loan really is.
What is a Home Equity Loan?
Actually, every home loan is a home equity loan. The term simply means that your lender will lend you money provided you have sufficient ownership. An example will explain it better.
- If you have a home that is valued at $400,000 and you do not have a home loan you have 100%, or $400,000 equity in your home.
- If you have a home worth $400,000 but have an existing mortgage of $300,000, you have 25% or $100,000 equity in your home.
What can you do with a home equity loan?
Most people associate a home equity loan as one where you borrow against your existing equity to:
- Consolidate smaller debts like credit cards or personal loans.
- Pay for some personal expenses like weddings, holidays, renovations or large purchases like home theatre systems.
- Assist in purchasing an investment property.
Each of these 3 categories need further explanation, but in every case you need to know that a lender will never lend any more than 95% of the value of your home, and in most cases 90%.
That means that, in the example we used above where you have an existing loan of $300,000 on a home worth $400,000, you will be able to access up to 90% of the value of the home ie $360,000, an extra mortgage of $60,000.
Many borrowers don’t understand this basic principle about an equity home loan, so it’s important to get it clear in your mind.
It doesn’t matter how much your income is, or that your borrowing capacity worked out on an online calculator (even using an independent site on a home equity loan) gives you a much higher figure. If you don’t have sufficient home equity you won’t succeed with an application.
In summary, there are some basic steps to take to make sure you can get the home equity loan you want.
- Get a realistic idea of what your home is worth. Bear in mind that a bank valuation will be more conservative than your local real estate agent.
- Make sure you are earning enough income to qualify for a home equity loan.
- Calculate your needs and make sure you will not be borrowing more than 90% of your home’s value.
- Don’t rely on online research completely because you will not be aware of the variety of loans on the market.
The easiest way to work out whether a home equity loan is going to work for you is to call a broker, namely me!
I will give you a quick over the phone assessment that will only take a few minutes so you start out on the right foot and make sure you get the best home equity loan that will suit your individual needs and take the sting out of the loan application process.
To find out whether you qualify for a home equity loan phone 1300 133 193 now.
