Using your home equity, you can top up your mortgage to pay for things like credit card debts, GEM Visa debts, Q Cards, holidays, cars, boats, jewelry, and the list goes on. If you have debts or planned future expenses and you’d like to put this on your home and make it so that payments are lumped in with your mortgage payments then you need to apply for a top up. You may only want $10,000 or $25,000… or you may want $100,000+ for a bunch of different things.
You may also do this for renovations, extensions, and to build up a revolving credit to allow for a deposit on another property.
The process is simple enough. Firstly, you need to have enough home equity to do this.
That means your home loan has to be 80% or less of the current home value by at least the amount you want to top up. Let’s look at an example. Assuming your house is worth $960,000 and your mortgage is $568,000. You take 80% of $960,000 which is $768,000 and minus your mortgage to show your usable equity.
Here is the equation:
Home Value multiplied by 80%, minus the mortgage
= Usable Equity
$960,000 x 0.80 (80%) = $768,000
= $200,000 (Usable Equity and Potential Maximum Top Up)
So you’ve worked out your usable home equity, now we need to see if your bank, or any bank for that matter, is going to let you max out your lending on this property. Said in another way – will the bank let you extend your mortgage from $568,000 to $768,000. This is usually going to be dependent on your income. There are a variety of more complex equations done behind closed doors called ‘servicing’ or ‘serviceability’ calculations. A mortgage adviser or banker needs to see if your income can cover the addition of new debt (the $200,000). Now if you only want a small topup it is likely going to be fine unless you’ve had major changes to your income since you first got your mortgage or you’ve had some ‘bad account conduct’ which means you’ve missed mortgage/debt payments recently.
If you’d like to chat about a mortgage top-up then fill in the details in your online profile or give us a call. Working out usable home equity when you have lots of properties is a little more complicated and we’ll need more info for that. iRefi Advisers are client focused and try to deliver so much value it’s a no-brainer to chose us as your go-to people for support on mortgage and loan topups and applications. It is free and there are no obligations.