I'm looking as using the equity in my house to get a lil more cash say 20k.

Am I better off getting a separate personal loan for this or putting it on my house loan.

I've heard that people who use equity never end up paying their houses off. But if I get a personal loan, the interest rate would be higher so the loan would be costing me more...

Anyone had any experience with this?

What do you need that much money for.

Overall wealth building? I'd say definately use the equity in the house....personal loans have high interest rates. But yeah if you keep doing it you will not pay your house off any sooner.....

Economic recession and all that jazz.....is it the best idea to be getting further into debt? 20k is a good 6-12 months of loan repayments....

I've heard that people who use equity never end up paying their houses off. But if I get a personal loan, the interest rate would be higher so the loan would be costing me more...

I think the deal with that is that when people take equity out they dont increase their home repayments, whereas if you took out a personal loan you would pay that back in addition to your regular mortgage payments.

Just go for the lower interest rate and that'd be your home loan. That's what I would do. But yeh as Bah said, make sure you try to make extra repayments...

given the current economy, be very careful what you borrow money for. If you do need the money, use your equity, but pay it back seperately than your usual payments, and at the same frequency that you'd be paying back a personal loan.

I'd sworn off borrowing money after having paid off all my debts and moved to the land of the free, yet now I find myself barely two weeks into the place and I've already bought a house ... woops!

depends on what your gonna use the cash for.. coke, cars or hoes is a no goes

whilst its good on principle (ie access to cheap money), you've gotta think, why's it cheap? Cos it's secured against your HOUSE.

sell house, bet on black, profit

lol. why would you want to pay more interest. better yet take out a home equity loan and i'll charge you the extra interest.

more mortgages for the win!

im going for my third right now

Mortgages can f*** themselves, I'll be buying my property outright.

Interest is for suckers.

Have fun living with your parents for 10 years.

Sif, I got my plan. Not buying a $400k house in the suburbs that's for sure.

20k over 5 years with high interest is expensive.
20k over 30 years with decent interest is more expensive.

I've heard that people who use equity never end up paying their houses off. But if I get a personal loan, the interest rate would be higher so the loan would be costing me more...

Your mortgage is over 20-30 years. A regular personal loan is 3-5.

Dipping into home equity costs you a lot more. If not an emergency and you are not using the money to generate wealth beyond your mortgage rate don't do it.

Its loopy to put cars and boats and holidays and booze and whores into your mortgage.

Be careful paying extra off your home loan too. If your on a fixed interest loan atm you can be charged daily fee's for exceeding repayment allowances.

Its loopy to put cars and boats and holidays and booze and whores into your mortgage.

With the exception of booze and whores of course.

Just did this myself. I worked out the repayments on the borrowed money if it was a personal loan and have set that aside to dump into the mortgage on top of our current payments. Lower interest rate and should pay it off pretty quick so everyones a winner!!

i should have mentioned, yer, we setup our additional mortgages to be paid back in 5 years time:

so we're getting mortgage interest rates for personal loan time periods;

i should have mentioned, yer, we setup our additional mortgages to be paid back in 5 years time:

so we're getting mortgage interest rates for personal loan time periods;

That's the only way to do it. Keep seperate records/spreadsheet and make seperate payments to keep on track. We bought our last car doing that and paid it off pretty quick but in saying that I'm probably not going to do that again.

Our leasing options at work are pretty good and keeps things easier to keep track of and you don't have the discourage of your mortgage going up instead of down.

yeah live it up on credit. it's all good.

be careful, i pulled $30k out of my equity and now i have nothing to show for it

be careful, i pulled $30k out of my equity and now i have nothing to show for it

is that how you acquired your wife? russian bride? BAM

He paid too much!

yeah live it up on credit. it's all good.

I hate agreeing with infi, makes me feel all dirty.

Now is not the time to trim equity from your home imo.

Unless its an emergency, if you're really going to be all disciplined and pay it back within 5 years, why not save instead, pocket the interest, and buy it in 3?

last edited by Hogfather at 11:31:35 29/Apr/09

we dont like waiting for kitchens, bathrooms and decks:

we want it yesterday;

Reno's are a little different, because you are enhancing the asset and the cost of the reno will usually add far more value to the house. In fact with these cheap interest rates and lull in the construction industry I dare say it would be a great idea.

Like others have said. Use the equity if you can discipline yourself and not keep dipping in. Try to pay it back in the same time you'd pay off a personal loan (so up your monthly payments). It's a slippery slope for some people "meh, what's another 40k over 20 years? I'd really like that boat".

hooray!

with the new interest rate we've signed up for, our repayments with a substantial sum on top are actually less than what we were repaying before:

yeah it's awesome!

Surprised this hasn't been typwnd yet.

I personally would never take money out of my house equity unless the situation really called for it. One potential situation that I can think of is if I crash my car and need to buy another one - but even in that case I'd only pull $10k and buy a second hand car anyway.

I'd never pull equity to invest - especially in early stages of home loan where you interest is huge. You can't possibly make more money from investing than you would be paying interest - unless of course you are starting the next Crazy John's or JB HiFi with your $20k...

sweet, bank just called me then to approve our third mortgage;

deck is go, i repeat, deck is go;

third mortgage?! so how much have you borrowed against your house? how much is it worth?

If you are going to take money out of your home loan, it should be to enhance the home that is mortgaged.
Do not put holidays, cars, or jewellery on your home loan.
If you can't afford a personal loan, maybe it means you can't afford it!!!

we will have borrowed 1/3 of the houses original worth between the 2nd and 3rd mortgage

house is being revalued soon, last time it was revalued, before we had done any renos, it was worth 20% than we paid for it:

since then, we've done the kitchen, the bathroom and a new roof (insurance paid for that), plus we painted:

will be interested to see what its worth vs what we paid;

My repayments started at ~1.4k, With the new interest rates they are $930.
Currently putting $1.2k as the repayments.

It really, really, depends on what you want to borrow the extra 20k for. As others have said, Increaase your monthly repayments to cover the cost of your extra loan for that 3-5 year period. If you can do that they it could be worth doing (Again depending on what you actually want the money for.)

You also have to allow for that interest rate to come up. After everyone stops panicing and starts buying stuff again, those rates are going to go up. The government is going to need to try make some of the money back they're spending right now. Be sure you can afford your payments to be much more then what they are now.

If you are going to take money out of your home loan, it should be to enhance the home that is mortgaged.
Do not put holidays, cars, or jewellery on your home loan.
If you can't afford a personal loan, maybe it means you can't afford it!!!

this doesn't make sense
if you're going to borrow money, you should do it at the cheapest rate

if you're going to borrow money, you should also think about why you are borrowing it.

If you are going to take money out of your home loan, it should be to enhance the home that is mortgaged.
Do not put holidays, cars, or jewellery on your home loan.
If you can't afford a personal loan, maybe it means you can't afford it!!!

Whoa whoa whoa. Hold it right there. What's with the new avatar?

kitty got tired of dancing, now she's spyzing!

wtf, some of you are on crack.

if you must borrow, then you are crazy not to borrow at the lowest available interest rate. this usually equals redrawing on the mortgage.

how exactly is paying more interest via say a personal loan beneficial????

and as for saving while you have a mortgage, why save up money, earning say 3.5% PA that you will subsequently be charged tax on (reducing to say 2.5%).

putting the savings into your mortgage that's charged at say 5.5% (and hence SAVING 5.5% PA on it) and then redrawing tax free sounds better to me. 5.5 is greater than 2.5.


last edited by orbitor at 13:54:26 29/Apr/09

Because most morons don't up their repayments.

Even if you do it isn't the same as having two loans (home loan and 'extra').

if you're going to borrow money, you should also think about why you are borrowing it.

this doesn't make sense
why would you think about why you are borrowing money?

most morons should get an accountant or financial adviser then if they can't do the simple calculations themselves.

I think a lot of people are saying not to borrow if you dont really need too (Which wasn't really clear but what I meant.) Any extra money you can have going into your Home loan is much better then having it sitting around.

why would you post that doesn't make sense borrow against thinking?

Much sense not be made Jim today

plz lizt gud reazonz for going into debt, kthx

Oh, sorry - thought this was 4chan. I'll start:

1. To pay for a funeral
2. To purchase a house
3. To purchase a primary vehicle
4. To start a business

1. To make a profit at a personally acceptable level of risk
2. See above

kat what's so nonsensical about "if you're going to borrow money, you should do it at the cheapest rate"?

wtf, some of you are on crack.

if you must borrow, then you are crazy not to borrow at the lowest available interest rate. this usually equals redrawing on the mortgage.

This makes sense only if you over-pay your new mortgage specifically to repay the loan. The VAST majority of people who draw down on their equity DO NOT DO THIS, and simply end up paying interest on the new principal for the term of the loan.

"Some extra cash" sounds like a fundamentally bad reason to dip into the family home's equity.

how exactly is paying more interest via say a personal loan beneficial????

and as for saving while you have a mortgage, why save up money, earning say 3.5% PA that you will subsequently be charged tax on (reducing to say 2.5%).

I don't think personal loans are a good idea either. But if its a personal loan for 5 years that you MUST pay back, or 20k over 25 then it is definetly cheaper.

Paying a loan for a depreciating asset like a car is straight up a vanity or (more usually) a stupidity tax.

putting the savings into your mortgage that's charged at say 5.5% (and hence SAVING 5.5% PA on it) and then redrawing tax free sounds better to me. 5.5 is greater than 3.

You're still ahead even if you don't save the money in a redraw or offset - which I would BLATANTLY OBVIOUSLY recommend in this case.

5.5 is greater than 3, but you haven't been paying interest (lols) on a depreciating asset, and have maintained a stronger financial position through a period of economic uncertainty.

Having a new-ish kitchen or deck won't mean f***ing squat if the economy continues to fold, house prices fall (hi to you over-capitalisation and negative equity!) and you lose your job.

5. To pay for hookers or skydiving. (Hey, you'll have the memories.)

6. Guns, sandbags and barbed wire to defend your home from the apocalypse.

Paying a loan for a depreciating asset like a car is straight up a vanity or (more usually) a stupidity tax.

Totally concur with this.

However, I have one exception. If you are reliant on your vehicle and your vehicle dies (crash, or whatever) and another one is essential for your business - then it's an investment to purchase another one, however even still I would never buy a new car if borrowing to purchase a vehicle.

if (Hogfather==FaceMan) return False;

However, I have one exception. If you are reliant on your vehicle and your vehicle dies (crash, or whatever) and another one is essential for your business - then it's an investment to purchase another one, however even still I would never buy a new car if borrowing to purchase a vehicle.

A car should be comprehensively insured and have a proper maintenance budget if its a critical business asset, but yeh agree.

all fair enough hogfather, but i did preface that with "if you must borrow"

obviously not borrowing ends up with you being in a better state financially than borrowing, unless you make an excess profit on whatever you borrowed for.

Borrowing to renovate a house (within reason) isn't stupid even in this climate. Demand for decent houses in Brisbane is still pretty strong. If you're doing the renovations yourself it could even be a great finacial decision.

If you don't increase your repayments to repay any redraw ASAP that's your own fault for being a mong.

last edited by orbitor at 14:07:29 29/Apr/09

This makes sense only if you over-pay your new mortgage specifically to repay the loan. The VAST majority of people who draw down on their equity DO NOT DO THIS, and simply end up paying interest on the new principal for the term of the loan.

it makes sense unless you have a specific financial setup where it doesn't. imo you're blaming the method instead of the lack of discipline some people might show. ('VAST majority' wot?)
I completely agree with orbitor

If you don't increase your payment (other than what the bank increases the minimum payment to be after you withdraw the 20k) the 20k you pull out will end up costing you around $40k by the time it is paid off through the homeloan.

The trap is because a homeloan is over a much longer period and is a lower interest rate than a personal loan, the increase in loan balance only has a small effect on the minimum repayment, leading to a bit of a 'cheap money' mentality.

But that lower interest rate combined with the longer term will actually mean the loan is much more expensive, unless you payoff additional - not just cover the banks increase in minimum payment.

eg:

$200,000 loan over 25 years @ 7.5% is about $243,394 in total interest.

Withdraw an extra $20k on that (with only a modest $144 a month minimum increase) and the interest payable is $267,734.

So the extra $20k has cost you $24,340 in interest for a total of $44,340.

Contrast that to a personal loan (say for a car):

$20k @ 9.75% over 5 Years is a minimum repayment of $422 a month (much dearer than homeloan) with total interest payable of $5,320 (much cheaper than homeloan!)

EDIT: Gah, looks like everyone has said all this as I typed it :(


last edited by mission at 14:16:13 29/Apr/09

again, you're blaming the tools

In my personal experience equity draw - especially via f***ing "debt consolidation" - is NOT managed well Jim. Generally the bank wins. Over the years I've had so many people tell me they were much better under these arrangements.

People generally just are not disciplined enough to pay back a voluntary redraw in the time it takes to make it worth it.

Have a look at how many people bought into Storm Financial's debt-is-awesome hymn book of greed and lost their homes.

So everyone thinks that personal debt can be bad if you're gonna have nothing to show for it afterward BUT YOU ALL AGREED WITH THE STIMULUS PACKAGE

f*** THIS.

I've got a shiny new bike to show for it :)

Paying a loan for a depreciating asset like a car is straight up a vanity or (more usually) a stupidity tax.

call it what you want, i wouldn't have it any other way

<3 vad63

BUT YOU ALL AGREED WITH THE STIMULUS PACKAGE

I didn't 'agree' with the stimulus package. I thought the cash component was too high - more infrastructure spending and business support was my personally-preferred outcome.

The decision to lay down a tonneof money was pretty much taken out of Australia's hands by the IMF and 'Merica.

I also think that household finance and national Governance only loosely intersect. You obviously think that the nation should be run like a household budget, and that's cool, I just don;t agree.

last edited by Hogfather at 14:41:03 29/Apr/09