If you have built up some equity in your home loan and wish to use these funds, you can apply for a home equity loan, also known as a secured loan. The loan is “secured” because your home acts as collateral.

How to qualify

Most lenders will expect you to have at least 20% equity in your home, although some lenders will expect you to have more equity in order to qualify. However, your eligibility will also be affected by your credit score, any other debts, and any tax issues.

What can you use the loan for?

There are no restrictions on how you spend the funds from your equity loan. However, as this is drawn from the security of your property investment, it is best to channel the funds into improving your investment, particularly if you are drawing on a significant amount of the equity. Most borrowers use the funds for home renovations, or they consolidate their other debts by absorbing them into the home loan.


A secured loan, or home equity loan, is easier to have approved than other loans because you are using your own home as collateral. You have the flexibility to use the money for whatever you wish, along with the benefit of lower interest rates and more attractive repayment terms than the terms available for unsecured loans or credit cards.


While the interest rates might be appealing, you have to keep in mind that the interest is now calculated on a higher principle debt, as you have reduced your equity. Your lender may also include a range of fees and charges, so ask about any additional expenses before signing up for the loan. You also need to carefully investigate any of the lender’s conditions of the loan, to ensure you can pay it off effectively.

The biggest drawback, of course, is that you have reduced the security in your own home, so if you cannot pay off the debt, you are at risk of losing your home. It is extremely important to calculate ahead to ensure you can manage the repayments based on your new mortgage.


There is a wide range of options available for secured loans or home equity loans, so you need to shop around to find the right deal for you. Your mortgage broker will be able to help you sort out all the options, so you can choose the right equity loan for your needs and financial situation.