How does equity workEquity simply means the value of your property minus what you owe. An equity home loan allows you to borrow up to that amount, either in full or in stages. Many people use this type of loan for home improvements or investing.
Over time, as your house value increases your equity increases. Likewise, as you reduce the amount you owe for the property through your repayments, your equity increases.
As long as the purpose of borrowing is legal, most lenders are fairly relaxed about this type of loan. Remember, the amount that you borrow does have to be repayed, and some lenders charge a higher interest rate for this type of loan. Therefore you should allow for extra repayments in your budget.
Considering an equity home loan? Contact Your Local Finance Broker for more information.
Found in: Article (548), Section (5)
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