Releasing equity
Releasing equity is a means of obtaining funds by using the value of your house as security.
For example:
Your house might be worth $800,000 and may have an existing first mortgage of $300,000. You may wish to apply for a new home loan of $500,000 to repay your home loan and $200,000 cash out. Your old mortgage will be discharged and your new lender will take over the outstanding loan amount using your property as security.
Your new lender will request a discharge authority that certifies the discharge of your previous mortgage.
The ‘cash out’ can be used for:
- Buying an investment property
- Investing in shares
- Consolidating debt
- Renovating
- Construction project
‘Cash out’
As the money is released directly into your bank account, the lender has no control as to how you spend it. Consequently, lenders consider this to be a high risk and will often try to reduce their risk by requesting evidence of what you are using your money for e.g. a contract of sale to buy a property or a letter from your accountant confirming you intend to buy shares.
No ‘cash out’
Some lenders have a no ‘cash out’ policy and will decline your loan outright. These lenders tend to limit the amount to $10,000 for low doc loans.
Speak to one of our experts who understand ‘cash out’ loans and can help you get one today!