A home loan top-up is a way of increasing the amount of your home loan so you can borrow some extra money. If you've been paying off your loan and building equity in your home, then your lender may let you 'top up' your loan in this way.
A home loan top-up often works out cheaper than using a personal loan or a car loan. But adding to your home loan means your monthly repayments will increase and you'll pay more in interest over time.
| Response | 75+ yrs | 65-74 yrs | 55-64 yrs | 45-54 yrs | 35-44 yrs | 25-34 yrs | 18-24 yrs |
|---|---|---|---|---|---|---|---|
| I don't have a home loan, More often than quarterly | 41.86% | 24.84% | 12.28% | 8.7% | 3.15% | 0.97% | 11.43% |
| I don't actively check | 30.23% | 38.51% | 31.58% | 27.54% | 17.32% | 19.42% | 20% |
| Quarterly | 11.63% | 8.7% | 21.05% | 27.54% | 34.65% | 42.23% | 38.57% |
| Once per year | 9.3% | 18.63% | 24.56% | 22.22% | 24.02% | 13.59% | 12.86% |
| Twice per year | 6.98% | 9.32% | 10.53% | 14.01% | 20.87% | 23.79% | 17.14% |
As you pay off your home loan you're increasing the amount of the property you actually own. This is called equity. (Note that if you've been making interest-only repayments your equity won't increase much because you haven't actually started repaying the loan.)
If your lender lets you top up your home loan for the extra cash you can use this for any reason you like. You could renovate your house, take a holiday, or buy a new car.
Lenders set a cap on how much equity you can access. Some will lend up to 80% of your property's value, but it depends on your individual circumstances.
Topping up a variable rate home loan is usually straightforward. These loans are quite flexible and typically allow you to make extra repayments.
Fixed rate home loans are a different story. Often, lenders limit extra repayments on these loans. And topping them up is harder as well. Some lenders only allow top-ups on variable loans. But it really depends on the lender.
Check if your lender is able to provide a home loan top up. You'll then need to check you are able to top up your home loan with the equity you have.
It might be as simple as continuing that first conversation with your lender. Otherwise, you might be able to apply through your lender's online or app facilities. Some lenders charge an establishment or application fee, so be sure to check any fees involved.
Sit back and wait while your lender checks the equity you have and whether they believe you'll be able to continue meeting the extra repayment amounts. It may conduct a valuation on the home to check its current value. This will determine your loan-to-value ratio.
Once the lender has gone through the application and checked your serviceability, you'll be given the extra funds through a redraw facility. You can withdraw the cash as you need it.
Once you've spent the extra money you've borrowed, your repayments will increase. Alternatively, your lender may agree to let you extend your loan term instead. This means your repayments stay the same but you take a bit more time to repay the loan.
Either way, you end up paying your lender more interest.
The alternatives depend on what you're using the funds for. But here are some solutions:
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