Everything You Need to Know About Home Equity Loans – Loans Buddy

Author: Loans Buddy

Owning a home in Australia isn’t just about having a place to live — it’s also a powerful financial asset. As property values continue to rise, homeowners are discovering ways to tap into their home’s value to meet financial goals. One of the most effective ways to do this is through a Home Equity Loan.

In this guide by Loans Buddy, we’ll cover everything you need to know about home equity loans in Australia — how they work, the benefits, eligibility requirements, how to apply, and why choosing Loans Buddy can make the process simple and rewarding.

1. What Is a Home Equity Loan?

A Home Equity Loan is a type of secured loan that allows you to borrow money against the equity you’ve built in your home.

Equity is the difference between your home’s current market value and the remaining balance on your mortgage.

For example:

If your home is worth $800,000 and your mortgage balance is $400,000, your equity is $400,000.

A lender like Loans Buddy may allow you to borrow a percentage of that equity — usually up to 80% of the home’s value (subject to eligibility and financial assessment).

That means you could potentially access up to $240,000 in this example.

2. How Does a Home Equity Loan Work?

When you take out a home equity loan, you receive a lump sum amount that you repay over a set term, usually with a fixed or variable interest rate.

It works similarly to a standard mortgage — but instead of using the money to buy a home, you’re leveraging your home’s existing value for other purposes, such as:

  • Home renovations or extensions

  • Consolidating debts

  • Funding education expenses

  • Purchasing an investment property

  • Starting or expanding a business

  • Managing unexpected expenses or emergencies

Once approved, your loan is repaid in regular instalments (weekly, fortnightly, or monthly), based on the loan terms agreed upon with your lender.

3. Types of Home Equity Loans in Australia

Home equity loans come in a few different forms, depending on your needs and financial situation.

a. Standard Home Equity Loan (Lump Sum Loan)

This is the most common type — you borrow a fixed amount of money, receive it upfront, and repay it over a set term with interest.

b. Line of Credit Home Loan (Home Equity Line of Credit - HELOC)

This option gives you a revolving credit facility, allowing you to withdraw funds up to a certain limit whenever you need them — much like a credit card. You only pay interest on the amount you use.

c. Reverse Mortgage (for older Australians)

Designed for retirees, a reverse mortgage allows homeowners aged 60+ to access their home equity without making regular repayments. The loan is repaid when the property is sold or the owner moves into aged care.

Each option has different benefits, and Loans Buddy can help you choose the one that best suits your financial goals.

4. How Much Can You Borrow?

The amount you can borrow through a Home Equity Loan depends on several factors, including:

  • Your property’s current market value

  • The remaining mortgage balance

  • Your income and financial stability

  • Your credit history

  • The loan-to-value ratio (LVR)

In Australia, most lenders (including Loans Buddy) typically allow you to borrow up to 80% of your home’s value. However, this can vary depending on your financial profile.

5. Benefits of a Home Equity Loan

Using your home’s equity can be one of the most flexible and cost-effective ways to access funds. Here are some key advantages:

  • 1. Lower Interest Rates
Home equity loans generally have lower interest rates compared to personal loans or credit cards because they’re secured against your property.
  • 2. Large Loan Amounts
Since the loan is backed by your home’s equity, you may qualify for larger borrowing limits — perfect for major expenses like renovations or investments.
  • 3. Flexible Usage
You can use the funds for almost any purpose — from consolidating high-interest debts to upgrading your home or supporting your business.
  • 4. Potential Tax Benefits
In some cases (especially for investment properties), the interest on a home equity loan may be tax-deductible. It’s best to seek advice from a tax professional.
  • 5. Increase Your Property Value
Using the loan for home improvements or renovations can increase your property’s overall value, further strengthening your financial position.

6. Risks and Considerations

While home equity loans offer many benefits, they also come with responsibilities and potential risks:

  • 1. Your Home Is Used as Security
If you fail to meet repayments, you could risk losing your property. Always borrow responsibly.
  • 2. Interest Costs Over Time
Even with low rates, long-term repayments can add up. Ensure you calculate the total interest payable before applying.
  • 3. Market Fluctuations
If property prices drop, your home’s equity could decrease — potentially affecting your ability to refinance or sell.
  • 4. Fees and Charges
Some lenders charge setup, valuation, or discharge fees. Loans Buddy ensures full transparency so you know exactly what you’re paying for.

7. Home Equity Loan vs. Other Loan Types Loan Type Security Typical Interest Rate Loan Amount Best For Home Equity Loan Secured (by property) Low High Major expenses, investments Personal Loan Unsecured Higher Moderate Smaller needs, short-term goals Credit Card Unsecured Highest Low Everyday expenses Car Loan Secured (by car) Moderate Moderate Vehicle purchase

A home equity loan is often the most affordable way to borrow for large or long-term financial goals.

8. Who Can Apply for a Home Equity Loan in Australia?

You may be eligible for a Home Equity Loan from Loans Buddy if you:

  • Own a home in Australia (fully or with an existing mortgage)

  • Have sufficient equity (typically at least 20% of your home’s value)

  • Have a steady income and good credit history

  • Meet responsible lending criteria set by Australian regulations

Even if your financial history isn’t perfect, Loans Buddy can help explore flexible options tailored to your situation.

9. How to Apply for a Home Equity Loan with Loans Buddy

Applying for a Home Equity Loan with Loans Buddy is quick, transparent, and hassle-free. Here’s how it works:

Step 1: Check Your Eligibility

Use Loans Buddy’s online tools or speak to a lending specialist to assess your home’s current equity and your borrowing capacity.

Step 2: Choose Your Loan Type

Decide whether you need a lump sum loan or a line of credit, depending on your financial goals.

Step 3: Submit Your Application

Provide basic details such as your property value, mortgage balance, income, and identification documents.

Step 4: Property Valuation

Loans Buddy will arrange a property valuation to determine your home’s current market value.

Step 5: Approval and Settlement

Once approved, funds are released directly to your account, and you can start using your home equity to achieve your goals.

10. Why Choose Loans Buddy for Your Home Equity Loan?

At Loans Buddy, we specialise in helping Australians make smart use of their home equity with personalised loan solutions. Here’s what sets us apart: