Home equity loan (advice)

[diannescruffy]

We are just after about $5,000 to get some repairs done around the house. I've had bad credit in the past so can't get a loan any other way I don't think. I will ring the bank tomorrow but just wondering what questions I should be asking, what should I be looking out for, that sort of thing. TIA.

Regards,
Dianne

[Pandora]

It depends on your bank.
Our mortgage is with westpac, and they will let us increase our mortgage up to 95% of the property value if its for home improvements etc, anthing thats likely to raise the property value.

[MantaRay]

I guess the interest rate would be the big thing. I'd check all the Terms and Conditions and make sure there are no hidden surprises. Sounds like a good way to pay for the repairs though.

[Traveller]

I enquired about releasing some equity in my home recently. We did not have anything to redraw from the loan so it needed to be a mortgage increase. What we were told was

a) we would need to prove our income again, and go through regular credit scoring
b) minimum loan increase amount was $20,000

This was with Bankwest, so your bank may be different. But it was a no-go for us due to OH being self employed and only back in the country for a few months.

So, questions to ask. Do you have any overpayments of your mortgage that you could redraw? Would a mortgage increase require new credit scoring, or be a simpler process for an existing customer? What is the minimum loan amount? Would the increased loan amount be over the term of the loan, or over a shorter period albeit at mortgage rates not personal loan rates?

Good luck for tomorrow

[Pandora]

... Would the increased loan amount be over the term of the loan, or over a shorter period albeit at mortgage rates not personal loan rates?

Good luck for tomorrow

This is a good one. Even if its at mortgage rates, sometimes the bank will keep the increased amount seperate but at the same rate, meaning you can pay it off spereately and faster than the original mortgage (if you can afford any extra repayments you can put it all to that money)

[Visitor7]

We did this last year to do some renovations. We borrowed an extra $20k, but the minimum was $5k. We just had to show them our income statements for the past month, but they didn't do any checks. It helped us tremendously.

[diannescruffy]

Thanks all, I'm so glad I asked as I know absolutely nothing about this sort of thing. Neither of us are working, DH is studying, don't know if this would impact us at all. What happens with the Title, would we hand it in?

Regards,
Dianne

[Traveller]

If neither of you are working you will struggle to get a loan, even with your house as equity. Banks have tightened up their lending criteria since the GFC and proof of income is generally needed, hence why we struggled (self employed without 3 years accounts). You will need to prove you own your house and yes, you will need to hand the title deeds in which will be held in security until the loan is paid off in full. When you phone the bank ensure you have full details of your income (be it from centrelink, interest from savings, etc) as they will need to know everything to access your ability to repay the loan.