If you already have a home loan, you can potentially look to borrow more with a home loan top up.
A top up allows you to borrow additional funds using the equity you’ve built up in your home. This loan can either be consolidated with your existing home loan or taken out as an additional home loan.
These funds can be used for:
- Renovations on your home
- Making your home more energy efficient
- Debt consolidation
- Purchasing a second property
- Holidays
- Unexpected life expenses
Benefits of a home loan top up
- Lower interest rate – home loan interest rates are generally lower than personal loans or credit cards as the lending is secured against your property
- Can apply at any time – you don’t need to wait until your home loan expires off its fixed term. You can apply for a home loan top whenever you need it
- Flexible borrowing options to suit your goals
How much you could borrow
The amount you could borrow will depend on a range of factors including:
- The equity you have in your home – generally the banks will need you to have at least 20% equity remaining AFTER your top up is competed
- The current value of your home and what your Loan to Value Ratio is (the amount of your home loan compared to the current value of your home)
- That you can still afford your home loan repayments once your top up is completed
What options do banks offer with a top up home loan
When applying for additional funds on your home loan, the bank could provide the following options:
- Standard home loan top – if you have at least 20% equity in your home AFTER the completion of your top up, most banks will typically allow a straightforward top up on your existing home loan
- Green Loans – this is one of the more attractive options that most banks offer as the interest rate can be as low as 1% pa or 0% pa for a fixed period of time. This top up type is specifically for energy-efficient upgrades such as heat pumps, insulation, solar panels, double glazing, electric or hybrid vehicles etc
- Renovation specific lending – some banks offer a special interest rate if you’re needing the funds for home renovations.
- Debt Consolidation – by consolidating your short-term debts, such as credit cards or vehicle finance loans, on to your mortgage, you can reduce your overall interest rate and lower your loan repayments. However, it’s important to note that by stretching short-term debt over a longer loan term can increase the total interest paid if not structured carefully.
Thinking about topping up your home loan?
Whether you’re planning renovations, consolidating debt, investing in another property or simply need extra funds, the right loan structure can make a big difference. Speak with one of our experienced Mortgage Advisers to explore your options and find the most suitable solution for your circumstances.
