Home loan top-ups are one of the most common ways borrowers can increase their existing home loans. Top-ups are ideal for borrowers who want to renovate their home to increase its value or if they want to consolidate their debts.
What do your clients need to know?
The most important thing you should make sure your client understands is that not all types of home loans are eligible for top-ups. Each lender has its own criteria. In addition, lenders calculate the available top-up amount by assessing how much equity your client has in their property and their financial situation. Your client may also have to pay additional charges. Home loans have lower interest rates than personal loans or credit cards, meaning topping up their home loan will save them money over time; however, their loan repayments may increase. They can either bundle their top-up repayments with their current home loan repayments, or they can split the two repayments and keep them separate. The benefit of the second option is that their top-up loan can have a shorter loan term.
Pros and cons of home loan top-ups
In addition to increasing the amount of debt your client has, home loan top-offs are also eligible for Lender’s Mortgage Insurance. Even if your client already pays LMI on their existing home loans, they may have to pay it again if they borrow more than 80% on a top-up loan. However, by choosing to apply for a top-up loan instead of a personal loan or a credit card, your client may be able to avoid additional ongoing fees. In addition, increasing their home loan instead of refinancing allows your client to keep all their current loan terms without having to pay exit fees.
At Mortgage Street, we understand that home loans can be confusing. As a non-bank lender, our brokers specialise in atypical home loans, such as top-ups. If your client is interested in increasing their mortgage amount, we can help you find a loan that matches their financial situation.