What’s the difference between cash out and equity release?

Any general questions you might have in regards to loans and finance.
Kenna
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Joined: Wed Oct 30, 2019 6:02 pm

What’s the difference between cash out and equity release?

Postby Kenna » Wed Oct 30, 2019 6:03 pm

Thinking of using the equity from my property to use as a deposit for an investment property. I was going through your website and I came up upon cash out and equity release. What’s the difference between cash out and equity release?

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Otto Dargan
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Re: What’s the difference between cash out and equity release?

Postby Otto Dargan » Wed Oct 30, 2019 6:13 pm

Hello Kenna. Welcome to the forums.

An equity release is a top up on your current home loan whereas a cash out is when you release equity from your from your home using an equity loan.

With cash out, your current home loan is refinanced to a larger mortgage, providing you with funds equal to the increase in your mortgage amount. An equity release simply creates a new loan as an addition to your current mortgage.

Since cash out refinances your current mortgage, you only have to repay 1 loan, whereas for equity release, you will have to manage 2 loans, the current mortgage and the equity loan.

Cash out would be a better option if you are looking to lower your interest rate on your existing mortgage, but it does come with higher fees and closing costs. Equity release is a better option if you have built up enough equity in your current property and interest rates have increased since you took out your existing home loan.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a home loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Kenna
Posts: 3
Joined: Wed Oct 30, 2019 6:02 pm

Re: What’s the difference between cash out and equity release?

Postby Kenna » Wed Oct 30, 2019 6:30 pm

So a valuation of my property is an important aspect under both scenarios. How do I know that the valuer has properly assessed the value of my property?

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Otto Dargan
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Location: Sydney, Australia
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Re: What’s the difference between cash out and equity release?

Postby Otto Dargan » Wed Oct 30, 2019 6:43 pm

Hi Kenna,

Most banks and lenders will usually choose full valuation, where a valuer will visit and inspect your property to come to an accurate value for your property. This is the best and most accepted type of valuation as it physically inspects all the renovations or other improvements that have been made to a home, which could increase the value.

We can order a free upfront valuation for you with most of our lenders. And even though you can’t choose your valuer you can choose the lender with the highest valuation.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Kenna
Posts: 3
Joined: Wed Oct 30, 2019 6:02 pm

Re: What’s the difference between cash out and equity release?

Postby Kenna » Wed Oct 30, 2019 6:57 pm

Thanks for the information. How much can I borrow with either cash out or equity release?

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Otto Dargan
Mortgage Specialist
Posts: 7728
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: What’s the difference between cash out and equity release?

Postby Otto Dargan » Thu Oct 31, 2019 1:14 pm

Hi Kenna,

With cash out, you can:
  • Borrow up to 80% of the property value if you give a reason for it.
  • Borrow up to 90% if you provide concrete evidence for the use of funds.
Banks and lenders do not have a limit on the amount you can borrow.

With equity release, you can:
  • Top up your loan to 90% of the property value if you can show lenders that you can afford the new loan amount.
  • Release more than $10,000 if provide evidence behind the reason for the equity release like buying a new property, debt consolidation, construction, renovation or putting the funds towards shares and other investments.
The minimum amount you can release varies between $10,000 to $20,000. You will need to provide your recent payslips or a group certificate to ensure that you repay the equity release.

Please note that if you are borrowing above 80% of the property value, then you will have to pay Lenders Mortgage Insurance.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a home loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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