Australian Home Equity Loans
A home equity loan is a type of loan in which the borrower uses the equity in their home as collateral. These loans can sometimes be useful to help finance major home renovations, medical bills, the purchase of another property or a major purchase. A home equity loan creates a lien against the borrower's house, and reduces actual home equity.
Types of Home Equity Loan
There are 2 definitions you should be aware of:
Collateral is property that you pledge as a guarantee that you will repay a debt. If you don't repay the debt, the lender can take your collateral (the property) and sell it to get its money back. With a home equity loan or line of credit, you pledge your home or property as collateral. So, if you do not repay this debt you can lose the home and be forced to move
Equity is the difference between how much the home is worth and how much you owe on the mortgage or mortgages, if you have more than one mortgage.
Typically, a home equity loan or line of credit as it can also be known allows you to borrow money using the equity in your home as collateral.