Mortgage : Home Loans : Refinance : Home Equity Loans

By Maya Pavlovski

What is a home equity line of credit?

A Home equity line of credit is a revolving line of credit secured by a real-estate asset. A Line of Credit can represent your whole home loan if at the time of application your property is unencumbered, or it may form a part of your overall mortgage. The interest rate on a Home Equity Loan and payments on such a facility must remain variable because the borrower is allowed to draw moneys out and pay moneys into the line of credit as often as they wish.

A line of credit is like a credit card secured by your home or investment property. Most people use their credit lines only for major expenses such to finance home improvements, or pay off major debts. With a home equity line, you will be given access to a set amount of credit, but you only pay interest on the amount you access.

How Do I know How Much Equity I have in my Home?

This really quite simple. Your available equity is the difference between your current home value and your outstanding mortgage. If you have had your current home loan for a number of years without revaluing your property, you may find that you have a lot more free equity than you think.

Some lenders in Australia are offering home loans at 100% and even 106% of the value of your home. These loans are offered on home purchases. For a mortgage refinance, most lenders will be happy to lend you up to 95% of the value of your home. To qualify for such a high LVR (Loan to Value Ratio) you must have a clean credit history and have adequate financials to support your loan application. You will still be able to obtain a Line of Credit against your home even if your financials are not up-to-date or if you have had some defaults in your history - however the LVR available to you will be slightly lower (perhaps 80% - 90%) and the interest rate charged on the loan may be slightly higher.

Lets assume that your home is worth $400,000 and your outstanding mortgage is $200,000. If this is the case, your current mortgag!
e is up
to 50% LVR of your home value. You should be able to obtain a Line of Credit to the value of $ 120,000, taking the total loan to $320,000

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For additional Mortgage Refinancing information
and resources visit Mortgage Refinancing.
(http://www.refinance-refinance.net)
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This entry was posted on Monday, July 10th, 2006 at 5:17 am and is filed under Refinance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.