Equity loans allow you to release equity from your home to buy shares, property, to renovate or to consolidate debts.

In these cases, you may be able to use a 100% offset home loan or Line of Credit.

There are several other types of equity loans that may be better suited to needs and goals. Discover which one is right for you.


Shared equity loan

A shared equity loan is where part of the loan has no interest on it.

In return, the bank takes a share of the capital gains when you sell the property or refinance the loan.

For example, if you buy a home for $500,000, you may have a home loan of $400,000.

Of this $100,000 (or 20%), you may be charged an interest fee.

If the property is sold. the lender may take 40% of the capital gains.

So if you sold for $600,000, the lender would take $40,000 (40% of the $100,000 gain).

The benefit of this type of loan is that there are no repayments on the shared equity portion so you’re able to borrow much more than you could with a normal home loan.

The shared equity loan option is useful if you believe that capital gains will be minimal in the next few years.


Property share loan

A property share loan is used when two or more friends decide to buy a property together. This allows them to have separate loan accounts which are in their own names, all secured by the one property.

For example if John and Adam decide to buy a $500,000 property together however John’s deposit is $100,000 while Adam’s is only $50,000 then they may decide to have different loan sizes. John could have a loan of $150,000 while Adam would have a loan of $200,000. They would then both be contributing to 50% of the property value with either their deposit or loan.

In all cases when friends buy a property together their loans will be guaranteed by each other. In the above example if John was to miss his payments then the bank could call on Adam to make the payments instead. For this reason you must be careful as to who you buy a property with.


Seniors equity loan

Seniors equity loans are also known as a reverse mortgage. They enable a retired person to release the equity from their home either as a lump sum or in regular instalments to help them fund a better lifestyle in their golden years.

There are no repayments with this type of loan as the interest is added onto the loan each month. The loan is repaid when the property is sold or from the borrowers estate.

Care must be taken with this type of facility as often this loan will use up most of the borrowers equity which will reduce the size of their estate to be passed onto the next generation. We always recommend that you seek independent legal and financial advice regarding the loan and also inform your next of kin of your decision to take out a loan using your equity.


Line of Credit or 100% Offset?

Did you know that most banks set people up with Line of Credit equity loans even though they are difficult to manage and more expensive? Although we’ve listed below the common loan products people use when releasing equity we actually believe that in most cases a 100% offset home loan would be more suitable.

If you need help choosing the right equity home loan then please call us on 1300 889 743 or enquire online to discuss your situation with one of our specialist mortgage brokers.


CBA Viridian Line of Credit

CBA‘s Viridian LOC is a relatively unique product in that it has no set term or requirements to pay off the principal. As long as you keep repaying the interest, fees & charges then you are meeting your obligations under the loan.

While this means that the loan is suitable for investors, it can cause significant problems for anyone who has trouble managing their money or who does not have a clear strategy to repay the debt.


ANZ Equity Manager

We consider the ANZ Line of Credit to be too expensive when compared to other options such as an offset mortgage or the Line of Credits offered by other banks. ANZ charges a premium on the interest rate in return for the added features and flexibility of this product.

There is no set repayment schedule or term for this loan, it really is like a giant overdraft and as a result it has the potential for mismanagement & misuse. We would usually only recommend this type of product for a sophisticated investor.


St George Portfolio Loan

The St George Portfolio Loan is a type of equity home loan with the features of a Line of Credit. Unlike some other facilities the Portfolio loan requires that the primary loan account has a repayment made on it each month that at least covers the interest & fees charged.

One of the advantages of the Portfolio loan is that you have have up to 10 different sub-accounts all in different borrowers names & for different purposes. You can change the setup & limits of the accounts without going through a full credit assessment process. This great flexibility comes at the cost of a higher interest rate.


Westpac Equity Access Loan

Westpac’s Equity Access Loan or EAL is a flexible revolving line of credit product that can be combined under Westpac’s Premier Advantage Package to receive a better rate discount. With this loan you have the option to not make any repayments, as long as your loan remains under the limit.

This is useful for investors or other people that have irregular income sources. You can let the interest add on to the amount owing each month until you receive your next dividend or sell your next property. As with all Line of Credit loans this loan has the potential to be mismanaged if it is chosen by someone who is not financially sophisticated.


Hidden catches

Although a Line of Credit initially appears to be a good option there are many hidden problems with these loans types that lenders do not disclose to their borrowers up front:

  • The lender has the right to cancel your unused limit at any time. We have seen several major banks do this during the Global Financial Crisis of 2009.
  • Some loans do not have a set term or end date. Because of this unless you actually make additional repayments then you will never pay it off!
  • Some equity loans require a repayment each month whereas others do not. Even if you have made more than $100,000 in additional repayments but then you do not make any repayment the next month then the lender will deem your loan to be in arrears and freeze your loan account, leaving you unable to access your redraw until you make a repayment on the loan!

Research the loan you are going with carefully to be sure that the features, terms & conditions and interest rate are all competitive and suitable for your needs.


Apply for an equity loan

Our mortgage brokers are specialists in all types of equity release loans. We can quickly work out the best options for you and then help you to get a speedy approval.

Please call us on 1300 889 743 or enquire online and one of our mortgage brokers will call you to discuss your enquiry.

  • Sami Z

    The CBA Viridian Line of Credit seems like a good deal for me. I haven’t dealt with CBA before nor do I have any friends that have so how’s their service and what are they especially good at?

  • Hi Sami Z,

    CBA is the largest bank in Australia and we have dealt with numerous home loans and other mortgages with CBA. So, we have reviewed CBA Bank and have also listed out what we have found out to be their strengths and their drawbacks, which you can check for yourself here:
    https://www.homeloanexperts.com.au/lender-reviews/cba-home-loans-review/

  • Kinnear

    Hi, I want to know if I can make extra repayments in one month and then maybe skip the payments for the next. Is this possible?

  • Hey Kinnear,

    Some equity loans require a repayment each month whereas others don’t. So even if you’ve made extra repayments, your loan may be deemed to be in arrears if you don’t make any repayment the next month. Please make sure to research the loan you’re going with carefully beforehand.

  • Catalan

    Can your brokers help me to get a 95% Westpac Equity Access Loan?

  • Borrowing over 90% of the property value with Westpac is tough unless you’re an existing borrower / customer. However, we can help look into your application and if it seems not likely, we can help you apply with another lender with a similar product. Please feel free to contact one of our mortgage brokers by calling 1300 889 743.

  • fowles

    How do Westpac compare with other lenders? What are they better at and what are they worse at, can you tell?

  • We have an expert’s review of Westpac bank on our website, where you can check out what they’re great at and their drawbacks. Here’s the link to it:
    https://www.homeloanexperts.com.au/lender-reviews/westpac-home-loans-review/

  • J.Lethal

    I don’t quite get offset account so can you give me a simple example calculation with flat figures to help me grasp the point? Thanks.

  • Hi J, if your home loan was at an interest rate of 5% p.a. and the savings accounts with the banks were at 3.5% p.a. then instead of earning $3,500 p.a. on your $100,000, by putting it in an offset account you would save $5,000 in interest. Not only are you $1,500 ahead in this example, if you consider that the ATO would tax you on the $3,500 interest you earn from the savings account you actually end up even further ahead by choosing an offset account instead. You can learn more here:
    https://www.homeloanexperts.com.au/home-loan-types/100-offset-home-loan-account/

  • Mira

    I separated with my husband a few years back and got full rights to a property we bought together. It’s valued at $550,000 and there’s still $300,000 owing. I’m not employed at the moment and on government benefits. I want a reverse mortgage so can you help?

  • Unfortunately, you don’t have enough equity to be able to qualify for a reverse mortgage. What you can do is sell the house or perhaps lease out some rooms in it so you can earn additional money to help qualify. Please call our office to discuss in detail with a reverse mortgage specialist.

  • SimmoW

    Hi, great site! I will have a large tax debt (for us!) of around $100k after selling off our development property. I have $450k equity in the $900k house owned by my ex and I, we have agreed we will sell it in 7 yrs after my son leaves high school (they live in it) I’m using $400k of development sales proceeds to buy a rural property. But our cashflow will be low for the first few yrs. Could we apply for an equity release loan to free up some cash ($100k) to assist with farm establishment costs? I also have $700k of super but cant touch that for 11yrs (i’m 49yo).

    Thanks

    Simon

  • Hi Simon,
    Yes you could use the equity in your property that you own with your ex but only if she agrees. It would be a business loan using a cashflow projections for the farm, otherwise you wouldn’t be able to prove that you could afford to repay it. This is quite a tricky loan and in may or may not work depending on the details of your situation.

  • SimmoW

    Thanks for the prompt reply. Hang on, but withthe equity in the house (that WILL be sold in 7yrs) and also my super in 11yrs, the loan would clearly be repaid. We might be able to project some form of earnings but at this early stage i cant be sure. Is there another type of non-business equity loan that might be appropriate?

  • Hi Simon,
    Sometimes there are other options but they tend to be expensive and in most cases they won’t be suitable.
    As a general rule farming can only be financed where there is a truckload of equity and backup funds in case of emergencies. Lenders typically only approx 60% or so of the value of a farm

  • SimmoW

    Thanks again, will contact you shortly to discuss further