How to access home equity

Author: ME

Published at: 6/21/2016 3:28:58 PM



Refinancing can be an easy way to tap into home equity and secure a better deal.


Here’s some good news. You could have a lot more home equity than you realise.


First, a quick refresher. Home equity is what’s left over when you subtract your home loan from your property’s current market value.


Back to your level of equity. On one hand, rising property prices mean your home is probably worth a lot more than when you bought the place. Add to this your own efforts to pay down the loan, and chances are you may have amassed equity worth tens – possibly hundreds – of thousands of dollars. And it’s yours for the taking.


Trouble is, a lot of home owners aren’t sure about how to access their equity. So let’s see what’s involved.


From redraw to refinance


If you’re ahead with loan repayments, you may be able to use redraw to dip into your equity. It’s a simple option but you are limited to the value of those additional repayments. That may not be enough if you’re planning something big like a home renovation.


You could also consider a loan top up. This is as easy as getting in touch with your lender and asking to add a bit more onto the balance of your loan, and then continuing on as normal.


It’s not a bad option but here’s the thing.


Home loan interest rates are exceptionally low at present  and the home loan market is super competitive. In a nutshell, lenders want your business.


That makes it worth thinking about refinancing your loan. It involves taking out a new loan to pay off your old mortgage – with some cash left over representing a slice of your home equity.


Refinancing can offer several advantages


The beauty of this refinancing strategy is twofold. You can tap into equity to get the funds you need while also giving yourself an opportunity to secure a better deal.


Yes, refinancing does take a bit more effort than, say, a loan top up but it could mean pocketing savings from a lower rate, having better loan features or simply enjoying  the personal rewards of improved service from your new lender.


Whether refinancing a home loan is the right choice for you will depend on your personal circumstances. Your ME Mobile Bank Manager can explain the options to help you make an informed decision.