What Are the Advantages of Home Equity Loans?
Home equity loans help you access funds that can be used for a variety of purposes. With customisable options and freedom of usage, home equity loans can be advantageous when planned correctly.
Read this article to further understand what home equity loans are.
What is a home equity loan?
With a home equity loan, you can borrow money against the equity you have in your home. This value of your home is the difference between what your home is worth now and what you owe on your mortgage.
A home equity loan gives you access to this equity in the form of a lump sum loan, which you can use for various needs, such as home renovations or emergency expenses.
So, how does an equity loan work?
The loan is secured by your home, which means that if you fail to repay the loan, the lender may foreclose on your property. It’s important to consider the risks and benefits of a home equity loan before applying. You should also compare different loan options and carefully consider the terms and conditions, including the interest rate, repayment terms and fees, before making a decision.
What are the advantages of home equity loans?
A home equity loan offers the following advantages:
Low interest rates
Since home equity loans are secured by your home, they typically have lower interest rates than unsecured loans, such as personal loans or credit cards.
Access to large amounts of money
Home equity loans can provide you with a lump sum of money, which can be helpful if you need to make a large purchase or pay for expensive repairs or renovations.
Flexible uses
You can use the money from a home equity loan for a variety of purposes, such as home renovations or debt consolidation. It allows you to take advantage of opportunities that you might have missed otherwise due to a lack of funds. For example, investments with a ticking clock or properties for sale need quick money. This loan is a great way to explore opportunities, as long as you have good payback plans and can pay the required interest rates.
Fixed repayments
With a home equity loan, you’ll know exactly how much you need to repay each month, as the loan will have a fixed interest rate and set repayment term.
What are the best uses of home equity loans?
An equity loan can be used for various purposes. Here are the most common applications for home equity loans:
- Home renovations
- Debt consolidation
- Business expansion
- Purchase of bulk stocks
- Investment opportunities
- Payment of large ATO bills
Factors to consider when choosing a home equity loan provider
When choosing a home equity loan provider, consider the following factors:
Interest rate
The interest rate on a home equity loan is one of the most important factors to consider. It is important to compare rates from different providers to find the best deal.
Loan term
Home equity loans usually have a set term. You should choose a term that matches your financial goals and repayment ability.
Repayment options
Different lenders offer different repayment options, including fixed repayments, flexible repayments and interest-only repayments. Consider the options that best suit your needs and budget.
Fees
Home equity loan providers may also charge fees, such as application fees, closing costs and ongoing fees. As a borrower, you need to understand the fees involved and compare them between providers.
Reputation
Choose a lender with a good reputation and a track record of providing high-quality customer service. You can check reviews and ratings from their past customers.
Loan amount
Take into account the amount you need to borrow and ensure the lender can provide the amount you need.
Flexibility
Consider the flexibility offered by the lender in terms of loan amounts, repayment terms and other aspects.
Key takeaway
Home equity loans are short-term loans that you can use for various purposes. These loans require minimal documentation and offer fast applications, but they are secured by your home. Carefully consider the factors above before taking a home equity loan so you can find one that best suits your needs.
At Mango Mortgages, we offer short-term home equity loans with a simple application process. We require minimal documentation, and funding is typically available within 3–5 days from application. Apply online here.
Mango Credit
Yanis Derums is the Founder and Director of Mango Credit– a leading private lender specialising in bridging loans for personal use and business short term loans for commercial and/ or investment purposes. Yanis has extensive experience with financial analysis, credit assessment, product structuring, and general business management