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What Is a Home Equity Loan?
A home equity loan allows homeowners to borrow against the equity built up in their property. Equity is the difference between your home’s market value and your remaining mortgage balance. The more you’ve paid off, the more equity you can access.
How Home Equity Loans Work
Homeowners can use their equity as collateral to secure additional funding. Depending on the lender, borrowers may access up to 80% of their home’s equity. These loans can be used for renovations, property investment, debt consolidation, or major expenses. Home equity loans typically come in two forms: a lump sum loan or a line of credit, offering flexible withdrawal options.
Common Uses for a Home Equity Loan
Many homeowners use home equity loans to fund renovations, invest in property, consolidate debts, or cover major expenses. By leveraging your equity, you can access a lower-interest loan compared to personal loans or credit cards.
Property investors often use equity loans to expand their real estate portfolio, using the borrowed funds as a deposit for a second property. Others use it for home improvements, increasing their home’s value and long-term financial return.
Expert Home Equity Loan Advice & Loan Comparisons
At Freedom Mortgage Solutions, we work with over 30 lenders to find the best home equity loan rates and repayment options. Our team ensures you get a loan that maximises your equity while keeping repayments manageable.
Tailored Solutions & Hassle-Free Approvals
We understand that every homeowner has unique financial goals. Whether you want a one-time lump sum or an ongoing line of credit, we tailor loan options to suit your needs. Our mortgage specialists handle all the paperwork, ensuring a smooth and quick approval process.
How to Qualify for a Home Equity Loan
Qualifying for a home equity loan depends on your property value, existing mortgage balance, and ability to repay the loan. Lenders typically allow homeowners to borrow up to 80% of their available equity, but the final approval depends on income stability and credit history.
Before applying, it’s essential to assess how much equity you have and determine the best loan structure for your needs. A mortgage expert can guide you through the application process and ensure you access the most cost-effective borrowing option.
Who Can Apply for a Home Equity Loan?
Home equity loans are available to homeowners with sufficient equity in their property. Borrowers with a strong repayment history and stable income typically qualify for the best rates.
Lenders assess property market conditions, loan-to-value ratios, and financial stability when approving equity loans. Our mortgage specialists help homeowners navigate the lending process to secure the best terms possible.
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FAQ
Most lenders allow homeowners to borrow up to 80% of their available equity, depending on their financial profile. The exact amount depends on the property value, remaining mortgage balance, and income stability. Some lenders may allow borrowing above 80% with Lender’s Mortgage Insurance (LMI).
A home equity loan provides a lump sum payment, repaid over a fixed term with set repayments. A home equity line of credit (LOC) allows borrowers to access funds as needed, similar to a credit card. LOCs offer more flexibility but may come with variable interest rates and different repayment terms.
Yes, many homeowners use equity loans to fund the deposit for an investment property. By leveraging existing equity, borrowers can expand their property portfolio without needing a large upfront cash deposit. Lenders will assess rental income potential and financial stability when approving such loans.
Yes, home equity loans are a great financing option for home improvements and renovations. Using equity for renovations can increase your home’s value and provide long-term financial benefits. Many homeowners use equity loans for kitchen remodels, extensions, or energy-efficient upgrades.
Applying for a home equity loan involves assessing your property value, mortgage balance, and financial status. Lenders require income verification, a property appraisal, and credit history checks before approving a loan. Working with a mortgage broker helps streamline the application process and ensures you get the best terms.
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