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> Accessing your equity
With the strong growth in property values over recent year’s lenders
are increasingly encouraging people to access the newfound equity in their
properties for either personal or wealth creation purposes.
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Used appropriately a line of credit can be a very
positive tool! However if used inappropriately it may lead to greater
debt and financial hardship!
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We strongly recommend that you read our sections on Lines of Credit
/ Equity and speak to a Creative Finance consultant in conjunction with appropriate
taxation and financial planning advice.
Differences between Lenders
It is important to realise that this is the one area where lenders currently
vary the most. Differences may include:
- Base Interest Rate – some lenders charge a premium of
up to 0.5% per annum above their standard variable rate for lines of credit
/ equity.
- Available Discount – while some lenders pass
on the full discounts available under standard variable loans there
are many lenders
who will either cap their discount or not discount their line of credit
rate at all.
- Repayments – some lenders will require an interest
repayment whilst some will let you capitalise interest (allow it
to accrue on top
of the loan) so long as you are within the limit of your overall facility.
It is important to know this because it has important implications
for cash flow.
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If accessing your equity is required it is important
to sit down with a Creative Finance consultant as the variations
are great and it the differences in this part of your loan that
will most likely determine which lenders package is best for you!
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