Should I Use My Home Equity To Buy A Boat?

There are a number of factors to consider when making this decision, such as whether you have sufficient equity in your home, whether you have ready access to the home equity via a redraw facility or line-of-credit mortgage ... and whether you are comfortable with the increased risk of putting up your home as security. Ultimately, the decision comes down to your personal circumstances and what you are comfortable with.

What is home equity?

Your Home equity is the difference between the value of your property and the amount you still owe on your mortgage. It can be used as security for a loan, which is then known as a home equity loan.

If you own your home outright, then your home equity is the value of your property minus any outstanding mortgages or loans. For example, if your property is valued at $600,000 and you have an outstanding mortgage of $250,000, then your home equity is $350,000.

How can I use home equity to buy a boat?

If you have equity in your home, you can use it as security for a loan to buy a boat in a number of ways.

1. If you have a line-of-credit mortgage or a re-draw facility, you can simply draw down the funds from your mortgage.
2. In the event that you are proposing to spend a lot of money on a boat, you may consider a second mortgage on the home in order to unlock the equity.
3. Most applicants take out what is known as a home equity loan. A home equity loan is a type of loan that uses the equity in your home as security. The loan is approved based on the value of your property, minus any outstanding mortgages or loans. For example, if your home is valued at $600,000 and you have an outstanding mortgage of $250,000, you could potentially borrow up to $350,000 using your home equity as security subject to lenders' criteria.

What are the benefits of using home equity to buy a boat?

There are numerous benefits of using home equity to buy a boat.

1. You may be able to borrow a larger amount of money.
2. The interest rate may be lower than other types of loans.
3. The loan is secured against your property, which means that the lender may be more willing to approve the loan.

What are the risks of using home equity to buy a boat?

There are also several risks to consider when using home equity to buy a boat.

1. If you fall behind on your repayments, you could lose your home.
2. The value of your property may fall, which could leave you owing more than your home is worth.
3. You may need to sell your home to repay the loan if you are unable to make the repayments.

Conclusion

Ultimately, the decision of whether or not to use home equity to buy a boat comes down to your personal circumstances and what you are comfortable with. If you are comfortable with the increased risk, then using home equity to buy a boat could be a good option for you.

If you would like more information on home equity loans, you should speak to your mortgage broker or financial advisor.

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