How to finance a big ticket item in the New Year

By the resi financial blog team, 13 November 2014

What is a top up mortgage

As a New Year approaches, you may be looking to make some bug ticket purchases, such as a holiday or car, children’s education, home renovations or even an investment property. If you’re already set up with a home loan, then a top-up mortgage can help you finance these big ticket items.”

A top up mortgage is suitable for borrowers who already have a mortgage and have built up equity in their home. Basically, a top-up mortgage is a type of loan that gives you access to the equity you have built up in your home by allowing you to borrow additional funds against this equity.

The main benefit of this type of loan is that you don’t have to sell your home to access the equity accrued. It is also generally cheaper than taking out a personal loan as the interest rate on a home loan is lower.

The amount you can borrow depends on the value of your home, how much equity you have accrued as well as your personal circumstances. With top-up mortgages you don’t pay any interest on the increase in your loan until you draw down the money to use.

The main disadvantage is that if you borrow more than you need, this could extend the amount of time it takes for you to pay the debt back.

How do you apply?

A lender carries out the same checks as if you were applying for a new loan. This is to ensure you are able to handle the extra repayments. So you are likely to have to pay valuation and legal fees as well as mortgage protection insurance.  Other fees may also apply so make sure you check with your lender so you know exactly what to expect.

Calculator tools

You may find our calculator tools useful. Including a loan repayment, borroiwing capacity, are free, quick and easy to use and designed to help you with your goals.

Categories: home loans, mortgage