By taking out a loan against your property, you can get a cheaper way of accessing credit. It’s important that you don’t just loan for anything.

It’s also essential that you are informed and disciplined before taking out a loan against your property.

There are two ways to take out a loan against your property, namely through a Home Equity Loan or through a Home Equity Line of Credit.

One of the main reasons that people opt to take out a loan against their property is because home loans attract lower interest rates than other forms of unsecured debt.

Equity is the difference between the market value of your property and the outstanding amount of your bond. What is required however is an access facility.

A Home Equity Loan is a fixed lump sum at a fixed rate of interest. You borrow (and owe interest on) the whole amount, rather than being able to simply borrow what you need.

A Home Equity Line of Credit uses your home as collateral. You can withdraw the funds when you need them.

You can only borrow as much as you have already paid back. You should also ensure that when you take money out of your home loan, that you pay it back as fast as possible.

You should make an effort to pay more than your minimum instalment.

When you’re looking to take out a loan against your property, you need to be prepared to give the financial institution everything they need, potentially upfront. You should also expect follow-up questions as well as a review of your credit profile. There is often extensive paperwork involved.

So be prepared for a time-consuming process.

You need to consider the full costs involved in the process. Costs typically include second bond registration costs, conveyancing fees and the cost of valuing the property.

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