How to get a home equity or line of credit home loan

What is a home equity loan?

At some point in everyone’s life, they need a sudden – and sometimes rather large – cash injection. The money could be for a renovation, an investment property or maybe to help with college fees. One source of these funds could be the equity you’ve built up in your home. Essentially, you take out a loan that’s guaranteed by the equity you have in your property. There are several equity home loan products on the market to Australian borrowers, so it’s a good idea to head to your favourite comparison site to check them over.

Here’s also the line of credit home loan

While an equity loan is usually paid out to you in one lump sum, a line of credit (LOC) home loan is more like a credit card in that you can borrow up to a pre–determined amount of money as and when you need it. You’re constantly paying off the LOC, which means you’re able to “borrow it again” when the need arises. This LOC is also secured against your equity.

You need a decent amount of equity in your home

If you bought your home for, say, $350,000 ten years ago and you had a $50,000 deposit, your equity at that point was $50,000. Now, however, you’ve paid off $120,000 and the place has increased in value to $475,000. You now have roughly $295,000 in equity. As long as you fulfil the lending criteria of the provider you’re looking at, you could take out a loan or LOC on a proportion of this amount. 

Some lenders, like Bank of Queensland, will offer you between $250,000 and $999,999 as a line of credit. If you’re only looking for a small amount, then when it comes to line of credit vs refinance, refinancing to a cheaper rate of interest might be a better option. 

The advantages and disadvantages of line of credit home loan

The biggest advantage of a LOC home loan is that as it’s secured against your property, you’re deemed to be low risk by the lender so you’ll probably pay a significantly lower interest rate than you would on a personal loan or a credit card. Lines of credit are interest only as such your repayments are lower than a principal and interest loan with the same interest rate.

However, if you mismanage the loan, or you use the loan for investment purposes and things go wrong, you’ll lose that equity and you may struggle to repay the loan. In the worst–case scenario, you could lose the property.

It’s also important to look at what you’re using the loan for. If it’s to repay another debt, then you could end up paying more in interest in the long run simply because the line of credit may just carry on revolving. If debt consolidation is your purpose, then you may be better with a debt consolidation loan that has principle and interest repayments. 

How to get a line of credit on my mortgage

If you're applying for a line of credit you may need to satisfy the following criteria or supply the following information:

If you’re applying to a lender for a line of credit on your home loan then you’ll need to fulfil the lender’s criteria in order to get the ball rolling. You’ll also need to supply the following information:

  • The name and address of each person borrowing
  • The employment and income of each borrower
  • The outstanding balance on the mortgage as well as the monthly payment
  • The current estimated market value of the property
  • Photo ID of each borrower, and
  • The amount you want to borrow.

How much could I borrow?

You’ll need to use a how much could I borrow calculator to work that out. Try to keep the amount sensible so that you’re more likely to be approved and also so that you don’t have more to pay off than you really need or want to. Just because you can, doesn’t mean you should.

How to compare regular loans and line of credit home loans

Looking for the best home equity (LOC) loans is different from searching for “regular” mortgages.

Interest rates on lines of credit are typically higher than on a regular mortgage. You need to factor this into your overall consideration. 

The maximum amount that you can borrow is another vital consideration. Many lenders have relatively low maximum amounts – up to 80 per cent of your property value, while some offer up to 95 per cent if you have enough equity with loan mortgage insurance. 


This update is not financial advice. This article is general news and information.

Home Loans: The comparison rates are based on a secured loan amount of $150,000 and a term of 25 years.

Personal Loans: The comparison rates in this table are based on a loan of $30,000 and a term of 5 years unless otherwise indicated in the product name with^, in which case, the comparison rate is based on a loan of $10,000 and a term of 3 years. The comparison rates are for unsecured personal loans only for the relevant amounts and terms. The comparison rates for car loans and secured personal loans are for secured loans unless indicated otherwise.

WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. Comparison rates are not calculated for revolving credit products.

The products compared in this article are chosen from a range of offers available to us and are not representative of all the products available in the market and influenced by a range of factors including interest rates, product costs and commercial and sponsorship arrangements

InfoChoice compares financial products from 145 banks, credit unions and other financial institutions in Australia. InfoChoice does not compare every product in the market. Some institutions may have a commercial partnership with InfoChoice. Rates are provided by partners and taken from financial institutions websites. We believe all information to be accurate on the date published. InfoChoice strives to update and keep information as accurate as possible.

The information contained on this web site is general in nature and does not take into account your personal situation. Do not interpret the listing order as an endorsement or recommendation from us. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.

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