Short-Term Home Equity Loans: What They Are And Why You Should Consider Them
In this article, we’ll look at short-term home equity loans to include what they are, how they work, their uses and benefits, and finally how you can qualify for one.
Home equity loan: What is it?
A home equity loan utilises the equity you have in your property to let you have access to funds. Your equity is the difference between what you owe in your lending and the present “fair market value” of your property/home. Equity increases as you pay down your mortgage, and it will grow as your home’s value gains over time.
In Australia, home equity loans are a trend. They are enticing as they usually have lower interest rates than other types of finance. Typically, home equity loans have long terms (5-15 years duration). Now, there’s a growing demand for short-term home equity loans, which often have 2-36 months of duration.
How does a short-term home equity loan work?
A short-term home equity loan is incurred if you own your home or you have an existing mortgage. Lending institutions will assess the equity amount you have in your home, as well as your capacity to pay back. Basically, 70% of the home value will be deducted from your existing debt against the property. Once your application is approved for a short-term home equity loan, you will then pay the principal and interest rate every month until an agreed time period.
Where can you use a short-term home equity loan?
You can use it for quick fund access which is often for short-term use. Borrowers in Australia can use the equity in their homes to borrow funds for certain purposes, such as home renovation, debt consolidation and paying off a large bill.
How to qualify for a short-term home equity loan?
Lenders commonly look at the following criteria before they approve your application for a short-term home equity loan:
- Your credit score (if you want to know your credit score, check with different providers in Australia).
- Your other existing loans, whether personal loans or credit cards.
- The equity you have in your home (the agreed home value less your first mortgage).
- The ratio of your household debt to income.
The worth of your home may differ from its actual “fair market value'' which is used for equity assessment. To know the amount you can lend against your home’s equity, lenders will get an independent appraisal. This ensures that you only borrow what is in alignment with the market value of your house.
Conclusion
You can tap into your home equity through a short-term home equity loan. Funds can be used for various purposes, such as personal or business use, which are short term. These funds are secured against the equity you have in your property. In Australia, you can apply for a short-term home equity loan online from different lenders, including fintechs and private lenders.
If you want a hassle-free application process, get in touch with Mango Credit. We offer short-term home equity loans with quick approval. Call us on
(02) 9555 7073.
