Increasing an existing home loan, also known as topping up, can be an excellent way for your clients to receive extra funds. While not all types of home loans are eligible for top-ups, those that are can allow your clients to consolidate debts or renovate their homes.
The basics of “topping up” home loans
The amount by which your client can increase their home loan depends on how much equity they have in their property and their financial situation. Typically, increasing your mortgage will cost less than securing a personal loan or another type of loan. In general, home loans have lower interest rates. However, they may have to pay additional Lender’s Mortgage Insurance if they borrow more than 80%, even if they have already paid in on their existing home loan.
How can your client increase their home loan?
You should encourage your clients to consult their lenders about whether their home loans are eligible for increases or if they need to pay any additional charges or fees. You should also emphasise to your client that increasing their home loan increases the amount of debt they are in, which could increase their loan repayments. They should consider their loan’s terms and decide if the purchase they make has a life comparable to the life of their home loan.
In most cases, your client will have two options after they apply for a top-up home loan:
1. They can bundle the home loan increase with their existing repayments, which is excellent if they are renovating or investing.
2. They can split the repayments, keeping it separate from their current repayments, which is ideal for purchasing a car or consolidating debt.
If your client is interested in increasing their existing home loan and either of you has further questions not answered above, the expert brokers at Mortgage Street can help. As non-bank lenders, we are well-versed in unusual home loan situations. We are here to help brokers find their clients the best home loan options for them. If they are not available for a top up, they may be able to increase their home loan by refinancing or redrawing.