Cash out loan options

Accessing equity in the home is a great way to get extra cash to help with those one off or unusual expenses that pop up from time to time.

Instead of whipping out the credit card or getting a personal loan, other finance options should be considered if you own property.

What is an acceptable purpose?

You can get cash out against the equity in property for any worthwhile purpose. Here is a list of the most common reasons people seek cash out from their property:

  • Buy a car
  • Take a Holiday
  • Renovate the Home
  • Payout Credit Cards
  • Buy Furniture
  • Provide a Gift to Family
  • Pay School Fees
  • Pay Medical Bills
  • Small Business Expenses

  • Investment Purposes
  • Buy a Holiday Home
  • Buy Vacant Land

Unacceptable purposes are, but not limited to:

  • Business Expenses
  • Illegal Activities
  • Gambling Debts

Cash out versus Redraw?

Redraw is withdrawing extra repayments already made on the home loan. For example;

Minimum Monthly Repayment Actual Monthly Repayment Redraw available after 12mths
$1,250 $2,000 $9,000
$1,250 $1,300 $600
$1,250 $1,250 $0

A redraw is completed over the phone, in branch or online with little to no fuss and funds are usually in the designated account within 24-48hrs.

Cash out is when there are not enough funds for redraw. A full application is required along with income assessment, credit history checks and valuations.

Even if enough funds are available for redraw, there could still be other more suitable options available. This is where expert advice from experienced lenders like LendFirst can make the difference.

Line of credit versus term loans?

A Term Loan is a normal Home Loan with Principal & Interest repayments designed to be repaid within a designated timeframe.

A Line of Credit is an Overdraft that is Interest only. Balances fluctuate regularly but should never exceed the Limit. There is no formal repayment structure.

The purpose of the cash out will determine which is best. Most are a term loan with an offset which provides similar functionality as a Line of Credit but at a cheaper rate and a formal repayment structure.

A Line of Credit facility is worth considering if frequent withdrawals and deposits are required or the situation requires interest to be capitalised for a short period of time.

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