The Basics of Equity Loans
Recently updated on January 12th, 2023 at 12:04 pm
Homeowners are increasingly tapping into their home equity as a readily available source of credit.
Home equity loans enable you to borrow against the equity of your home to cover investments or expenses, such as purchasing a property, doing property renovations or making debt repayments.
What is an equity loan and how does it work?
Your home equity increases with the number of mortgage payments made and when the value of your home rises. Also, when you renovate your property, you add value to it, which then increases your equity.
Equity is an asset that can be withdrawn. A home equity loan allows you to secure funding by using your home equity. For example, you can use your built-up equity in the form of a home equity loan for a deposit for a new loan, contribute towards purchasing a new property or pay for renovations.
A home equity loan is a relatively quick and easy way to obtain a sizeable amount of money in a short time. If you are considering using the equity in your home, consider these points:
- Build your equity
You can improve the equity in your home by making payments on your mortgage or making home renovations that boost your property’s value.
- Analyse the pros and cons of getting an equity loan
Prior to applying for equity loans on homes, you must consider the risks associated with using your home as collateral. It’s wise to do this in conjunction with your accountant and finance broker.
- Check if you qualify
Loan eligibility qualification varies from lender to lender. Typically, home equity loans have lower interest rates than other loan products, such as credit cards or personal loans, as your house value secures the loan. Home equity loans also often have a fixed interest rate.
Can I use a home equity loan for anything?
A home equity loan can be used for a variety of purposes. Here’s an overview of some common uses:
• Home improvements
Many borrowers use an equity loan to improve the comfort of their home and increase its value.
• Education costs
Equity loans are often used to pay school fees and to contribute toward student loans.
• Debt consolidation
Equity loans can also be used to consolidate high-interest debt at a lower interest rate. Homeowners can use the fund to pay off personal debts, such as car loans or credit cards.
• Emergency expenses
Home equity loans are frequently used to offset an unexpected bill, such as a large medical or tax bill.
• Business expenses
Equity loans are often used by start-ups to help get a business off the ground. The facility can also be utilised by more established businesses to support growth and acquisition.
How to apply for an equity loan
At Mango Credit, we offer a simple way to obtain short-term funding. We are a leading provider of business short-term loans and bridging loans. Each of our funding solutions is designed to meet your needs and specific objectives.
Our application process is easy. We require no credit check or income assessment, and we are transparent about our charges, fees and interest rates. We also have flexible underwriting, and funding typically becomes available within 3–5 days from application. Click here to apply for a short-term equity loan.
Aside from home equity loans, we also offer bridging loans, caveat loans, first mortgage loans and second mortgage loans.
Home equity loans can be used for a variety of personal and business purposes. . Your mortgage broker is best placed to ensure you’re obtaining the most suitable loan for your requirements.