A handy guide to home loan top ups
Thinking about topping up your home loan? Learn how home loan top-ups work and when they make sense.
We’d all like to have a little more flexibility in our lives – especially when it comes to our finances.
Whether you want to renovate your home, pay off your credit card debt, or jet off on a dream holiday, a home loan top up can be a great and cost-effective way to access extra funds when you need them.
However, it’s important to understand the pros and cons of a home loan top up, as well as what’s involved in the process, so you can decide if it’s the right choice for you.
What is a home loan top up?
A home loan top up is an increase to your existing home loan amount. Think of it as adding an extra slice to your mortgage pie.
A home loan top up lets you borrow additional funds against the equity you’ve built up in your property.
How does a home loan top up work?
When you apply for a home loan top up, your lender will need to look at your current financial situation, including factors like your income, debts, and what your property is currently worth.
The key thing here is that your property's value needs to have increased since you took out your original loan, as this is what allows you to access the top up.
Why might you need a home loan top up?
Home improvements
Want to redo the kitchen, update the bathroom, or add that backyard pool you’ve always dreamed of? Renovations are one of the most common reasons for seeking a home loan top up, giving you the funds you need to get going on your project.
Big purchases
Whether it’s a brand new car or a bucket list family holiday to Hawaii, a home loan top up can provide you with the money you need for those large expenses.
Debt consolidation
If you're juggling multiple debts – like credit cards or personal loans - a top up can help consolidate these into your home loan, potentially at a lower interest rate. This can make it easier to pay off your debts more quickly.
Benefits of a home loan top up
Access additional cash
These additional funds can be useful for things such as renovating your home, buying an investment property, going on a holiday or consolidating debts like credit cards, personal loans or car loans.
Lower interest rates
In most cases, home loan interest rates are lower than those for personal loans or credit cards, making top ups a more cost-effective borrowing option.
Convenience
Adding to your existing mortgage can be easier than applying for a new loan, especially since you're dealing with your current lender.
Versatility
From home renovations to a dream family vacation, you can use your home loan top up for all kinds of expenses.
3 things to consider before requesting a home loan top up
Increased debt
At the end of the day, a top up means you're borrowing more money. This increases your overall debt and potentially your loan term.
Higher repayments
More debt means higher repayments, so it's crucial to ensure that you can comfortably manage the extra financial commitment that comes with this.
Home equity risk
By using your home's equity for your top up, you're reducing the portion of the property you own outright. This means that if property values fall, you could end up owing more than your home is worth.
Is a home loan top up right for you?
While a home loan top-up can seem like a fast and easy way to access extra funds, it’s important to be aware of what’s involved and how it can impact you both now and in the future.
When considering a home loan top-up, here are three questions you should be clear on:
- What do I need it for? Think about your reasons for wanting a top up and make sure it’s a financially savvy decision.
- Can I afford it? Consider your expenses and make sure you can comfortably afford the increased repayments without stretching yourself too thin.
- How will it affect me in the long term? Take some time to think over how this decision will impact your long-term financial plans.
A home loan top up can be a simple, flexible and cost-effective way to borrow the money you need. By weighing up the pros and cons of this option, you can make an informed choice that fits with your needs and goals.
If you want to have access to additional funds, you might be able to top up your home loan. Learn more about how our top ups feature works at Unloan.
Unloan is a division of Commonwealth Bank of Australia.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Tax law is complex and subject to change. For the latest information, check the ATO website or with your accountant or financial advisor.
Unloan is a division of Commonwealth Bank of Australia is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Applications are subject to credit approval, satisfactory security and minimum deposit requirements. Full terms and conditions are found on our Unloan Terms and Conditions. Modified Terms and Conditions will be set out in our Notice of Variation Agreement, if you are approved. This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.
