FNB Home Loans - What Are Home Equity Loans?
What do you do if you are in need of cash to do renovations or build on that extra bedroom? What if you want to consolidate debt or buy a new car?
If you have a property, it could mean looking at taking a further bond on the property. The first thing your mortgage originator would do is to ask you what the approximate market value of the property is and then also the outstanding bond amount.
The difference between the two is the equity in your property. That’s when you can apply for a 2nd bond, at FNB Home Loans department they also call it a further loan or home equity loan.
You must also be aware though, that even though you may have a lot of equity in your property, your income may not be enough to qualify for an additional amount.
An example of this is when the value of your property is R1 000 000 and you owe R680 000. The available equity in this property is R320 000. Your income is R20 000 pm. This allows you to qualify for a total bond of R660 000. This amount is less than you owe on the bond at the moment, which shows that you cannot apply for an additional home loan.
Conversely, you may have no equity in your property, but earn a substantial income, that would unfortunately also not help you.
This is illustrated when you earn R50 000 pm. This will allow you to qualify for a home loan of up to R1 600 000, but the property has a market value of R1 000 000 and you owe R980 000. There is only R20 000 difference, so in real terms there is no equity in the property as the banks will only consider giving a loan of R100 000 plus.
Although this person qualifies for up to R1 600 000 there is not enough equity in his property to be able to access additional funds.
These are just two examples of how you would not be able to apply, however, there are many more instances where clients do qualify for home equity loans. Please do not hesitate to contact us if you would like to apply.
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