What happens if I can't repay my home equity loan?

Because you're using the equity you have in your home loan as security, you could lose you property if you're unable to repay. This may also affect your mortgage so you should speak to a qualified professional about the risks and repercussions.

How much can I borrow with a home equity loan?

How much you'll be able to borrow with a home equity loan depends on the amount of equity you have in the property. Typically though, you can borrow the difference between your equity and 80% of the property value. For example, if you have 50% equity in your home (you've paid off half the value), you can borrow 30% of the value so that your LVR doesn't go above 80%. Some lenders will allow you to borrow more but you'll need to pay lender's mortgage insurance (LMI) which can cost thousands.

What can I use a home equity loan for?

A home equity loan can be used for any purpose. That includes: Debt consolidation Holiday Home renovations Medical expenses Home loan deposit for a new property

Can I use a home equity loan for a property deposit?

Yes, you can use a home equity loan as a deposit for another property. Banks and lenders will usually accept this as genuine savings, unlike if you were to use a personal loan.

Home equity loans aren’t just for renovations

20 of 38 results

Finder Score	Interest Rate p.a.	Comparison Rate p.a.	Fees	Features	Monthly Payment
Finder score 8.8 Great BankWAW Equity Home Loan	Finder score 8.8 Great	Interest Rate 6.09%	Comparison Rate 6.12%	Fees Application: $600 Ongoing: $0 p.a.	Principal & Interest20% min. equityOwner-occupier	Monthly Payment $3,030 per month	View details Compare product selectionCompare	loading
Finder score 8.5 Great AMP Bank Equity Flex Investment Variable Rate Loan	Finder score 8.5 Great	Interest Rate 6.79%	Comparison Rate 7.10%		Interest only40% min. equityInvestmentOffset account	Monthly Payment $3,260 per month	View details Compare product selectionCompare	loading
Finder score 8.4 Great AMP Bank Equity Flex Investment Variable Rate Loan	Finder score 8.4 Great	Interest Rate 6.64%	Comparison Rate 7.05%		Principal & Interest20% min. equityInvestmentOffset account	Monthly Payment $3,210 per month	View details Compare product selectionCompare	loading
Finder score 8.4 Great AMP Bank Equity Flex Investment Variable Rate Loan	Finder score 8.4 Great	Interest Rate 6.64%	Comparison Rate 7.05%		Principal & Interest30% min. equityInvestmentOffset account	Monthly Payment $3,210 per month	View details Compare product selectionCompare	loading
Finder score 8.4 Great AMP Bank Equity Flex Investment Variable Rate Loan	Finder score 8.4 Great	Interest Rate 6.64%	Comparison Rate 7.05%		Principal & Interest40% min. equityInvestmentOffset account	Monthly Payment $3,210 per month	View details Compare product selectionCompare	loading
Finder score 8.4 Great AMP Bank Equity Flex Investment Variable Rate Loan	Finder score 8.4 Great	Interest Rate 6.84%	Comparison Rate 7.14%		Interest only30% min. equityInvestmentOffset account	Monthly Payment $3,276 per month	View details Compare product selectionCompare	loading
Finder score 8.4 Great AMP Bank Professional Package Line of Credit	Finder score 8.4 Great	Interest Rate 6.84%	Comparison Rate 7.12%	Fees Application: $0 Ongoing: $415 p.a.	Interest only40% min. equityInvestment$1M+	Monthly Payment $3,276 per month	View details Compare product selectionCompare	loading
Finder score 8.4 Great AMP Bank Professional Package Line of Credit	Finder score 8.4 Great	Interest Rate 6.84%	Comparison Rate 7.14%	Fees Application: $0 Ongoing: $415 p.a.	Interest only40% min. equityInvestment$500k+	Monthly Payment $3,276 per month	View details Compare product selectionCompare	loading
Finder score 8.4 Great AMP Bank Equity Flex Investment Variable Rate Loan	Finder score 8.4 Great	Interest Rate 6.84%	Comparison Rate 7.14%		Interest only20% min. equityInvestmentOffset account	Monthly Payment $3,276 per month	View details Compare product selectionCompare	loading
Finder score 8.3 Great AMP Bank Professional Package Line of Credit	Finder score 8.3 Great	Interest Rate 6.94%	Comparison Rate 7.24%	Fees Application: $0 Ongoing: $415 p.a.	Interest only20% min. equityInvestment$500k+	Monthly Payment $3,310 per month	View details Compare product selectionCompare	loading
Finder score 8.3 Great AMP Bank Professional Package Line of Credit	Finder score 8.3 Great	Interest Rate 6.94%	Comparison Rate 7.21%	Fees Application: $0 Ongoing: $415 p.a.	Interest only20% min. equityInvestment$1M+	Monthly Payment $3,310 per month	View details Compare product selectionCompare	loading
Finder score 8.1 Great AMP Bank Professional Package Line of Credit	Finder score 8.1 Great	Interest Rate 6.84%	Comparison Rate 7.10%	Fees Application: $0 Ongoing: $415 p.a.	Interest only40% min. equityOwner-occupier$1M+	Monthly Payment $3,276 per month	View details Compare product selectionCompare	loading
Finder score 7.9 Great AMP Bank Professional Package Line of Credit	Finder score 7.9 Great	Interest Rate 6.94%	Comparison Rate 7.18%	Fees Application: $0 Ongoing: $415 p.a.	Interest only20% min. equityOwner-occupier$500k+	Monthly Payment $3,310 per month	View details Compare product selectionCompare	loading
Finder score 7.9 Great AMP Bank Professional Package Line of Credit	Finder score 7.9 Great	Interest Rate 6.94%	Comparison Rate 7.17%	Fees Application: $0 Ongoing: $415 p.a.	Interest only20% min. equityOwner-occupier$1M+LMI	Monthly Payment $3,310 per month	View details Compare product selectionCompare	loading
Finder score 7.8 Great AMP Bank Professional Package Line of Credit	Finder score 7.8 Great	Interest Rate 7.34%	Comparison Rate 7.65%	Fees Application: $0 Ongoing: $415 p.a.	Interest only40% min. equityInvestment$100K to	Monthly Payment $3,445 per month	View details Compare product selectionCompare	loading
Finder score 7.7 Great AMP Bank Professional Package Line of Credit	Finder score 7.7 Great	Interest Rate 7.39%	Comparison Rate 7.70%	Fees Application: $0 Ongoing: $415 p.a.	Interest only20% min. equityInvestment$100K to	Monthly Payment $3,462 per month	View details Compare product selectionCompare	loading
Finder score 7.5 Great AMP Bank Professional Package Line of Credit	Finder score 7.5 Great	Interest Rate 7.34%	Comparison Rate 7.65%	Fees Application: $0 Ongoing: $415 p.a.	Interest only40% min. equityOwner-occupier$100K to	Monthly Payment $3,445 per month	View details Compare product selectionCompare	loading
Finder score 7.4 Great AMP Bank Professional Package Line of Credit	Finder score 7.4 Great	Interest Rate 7.39%	Comparison Rate 7.70%	Fees Application: $0 Ongoing: $415 p.a.	Interest only20% min. equityOwner-occupier$100K to	Monthly Payment $3,462 per month	View details Compare product selectionCompare	loading
Finder score 7.1 Great Transport Mutual Credit Union Home Equity Loan	Finder score 7.1 Great	Interest Rate 7.49%	Comparison Rate 7.60%	Fees Application: $395 Ongoing: $0 p.a.	Principal & InterestInterest only5% min. equityOwner-occupierInvestmentLMI	Monthly Payment $3,496 per month	View details Compare product selectionCompare	loading
Finder score 7 Great BCU Bank All-In-One Line of Credit	Finder score 7 Great	Interest Rate 7.90%	Comparison Rate	Fees Application: $0 Ongoing: $0 p.a.	Principal & Interest20% min. equityInvestment	Monthly Payment $3,637 per month	View details Compare product selectionCompare	loading

Showing 20 of 38 results

Your equity is the amount of your property you own considering how much of the property value you've paid off through your deposit and loan.
You can borrow money using your home equity to use for any purpose.
Ways to borrow against your home equity include line of credit home equity loans and refinancing to borrow more money.

What is a home equity loan?

A home equity loan is a way you can borrow money by using the equity you've built up in your home. You can either do this by refinancing your home loan to borrow more money or by taking out a line of credit.

Your equity is the amount of your home you own. You can work it out by looking at the value of your property and subtracting your outstanding loan value.

You can usually take out a home equity loan value of the amount of equity you have up to 80% of the property value.

Let's take a look at a very basic example:

If you have a home worth $800,000 and you have $400,000 left to pay on your home loan, you have 50% equity. To borrow back up to 80% that means you could get a loan of $240,000.

How does a home equity loan work in Australia?

Home equity finance works by borrowing a lump sum of money for use on whatever purpose you like, including putting a deposit down on another property.

Most borrowers will refinance their existing home loan, using the equity to borrow more money.

Another option is a home equity line of credit, which many banks will use the term home equity loan for. These can be more costly options and are less used for personal use.

Expert insight: Releasing equity can be low cost borrowing

"Releasing equity is one of the cheapest ways of borrowing money as it's home loan interest rates with minimal fees. I help borrowers release equity for all types of reasons: home renovations, debt consolidation, health expenses, buying a car, investing into further properties or shares. I encourage borrowers to regularly check their interest rate against the market, however this is a great time to check your rate as the equity release process is a full application as if you're going for a new loan."

Raj Ladher

Senior mortgage broker, Equilibria Finance

Types of home equity finance

Home equity loan: A home equity loan is a lump sum loan that you take out separate to your home loan, but using your equity as security. This means you'll have separate repayments to your home loan.

Line of credit equity loan: A line of credit equity loan is a credit facility, which kind of works in the same way as a credit card. You have the credit available to use as and when you need it.

Cash out refinancing: This is where you completely refinance your home loan, but borrow more money with the lender. This means your repayments will increase, but you'll just have the one loan to repay.

How much does a home equity loan cost?

A home equity loan usually comes with interest rates of around 7% to 9%. This is more than standard home loans typically cost.

If the amount you want to borrow takes your total borrowing above 80% of the property value, you may also need to pay lender's mortgage insurance.

There can be establishment fees associated with home equity loans.

Pros and cons of a home equity loan

Benefits

Ease of access. Because you already have equity in the home, you're likely to be approved easily.
Flexibility. You can use a home equity loan for any purpose, from debt consolidation, to travel, to a new house deposit.
Features. Like home loans you can usually take advantage of additional features like extra repayments.
Payment structure. Home equity loans often give you interest-only repayment options to better manage your money, if that works for you.

Drawbacks

Difficult to manage. Because a home equity loan is a separate loan to your home loan, you'll have more than one repayment to manage.
More money lost to repayments. Having an additional repayment to make means you're using more of your income each month on repayments.
Security. Your property is used as security, so if you fail to meet the conditions of repayment you could lose your home..
Equity loss. By borrowing against your equity you're losing the equity that you have in the home.

How to compare home equity loans

As with any loan there are some key areas to focus on when you compare:

Interest rate. The lower your rate the lower your repayments.
Fees. The fewer the fees, the better.
Borrowing amount. You need to calculate how much equity you have in the home to see how much you would be approved to borrow. You should calculate not only how much you can borrow but how much your repayments would cost.
Loan term. Home equity loan terms are usually shorter than home loans, but longer than personal loans. Loan terms can vary between lender and equity loan type.

Frequently asked questions about home equity loans

How much you'll be able to borrow with a home equity loan depends on the amount of equity you have in the property. Typically though, you can borrow the difference between your equity and 80% of the property value. For example, if you have 50% equity in your home (you've paid off half the value), you can borrow 30% of the value so that your LVR doesn't go above 80%.
Some lenders will allow you to borrow more but you'll need to pay lender's mortgage insurance (LMI) which can cost thousands.
A home equity loan can be used for any purpose. That includes:
- Debt consolidation
- Holiday
- Home renovations
- Medical expenses
- Home loan deposit for a new property

Sources

Thank you for your feedback!

Written by

Rebecca Pike

Editor, Money

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Rebecca Pike is Finder’s money editor, with over 7 years of experience in mortgages and personal finance. A frequent TV and radio commentator, she frequently appears on Sunrise and 7News, Today and 9News, as well as Sky News, Channel 10 and across radio and print. Rebecca previously served as Editor of Mortgage Professional Australia. She has a Master’s degree in Journalism as well as ASIC-recognised certifications in Tier 1 Generic Knowledge and Tier 2 General Advice Deposit Products, which comply with ASIC guidelines. See full bio

Rebecca's expertise

Rebecca has written 253 Finder guides across topics including:

Home loans
Personal Loans
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