Of those who used their home equity, either by redrawing or refinancing to borrow more, the most likely reason was to fund renovations at 34 per cent but 19 per cent borrowed against the house to fund private schooling for the kids, data from Finder shows.
The reason for this is that during the housing boom, prices skyrocketed, leaving many Australians suddenly able to access tens of thousands of dollars in equity that they used to fund renovations or consumer spending.But in a falling market, homeowners can find themselves in trouble.Source:istockFinder’s data showed many were also dipping in to home equity to fund household expenses or to consolidate debts on credit cards or personal loans.
“Parents want the very best for their children, and for some that means private education,” she said. “But it’s a worry to see some spending more than they can afford and risking their homes for something that in Australia we can get for free.” “We’re finding it out more and more as more and more people use their equity to fund their lifestyles.”
She told news.com.au she did it because she knew she had another $20,000 payment coming up but needed a car. Silky Shah from Pendle Hill in Sydney redrew $20,000 from her home loan last year to pay for a family emergency back in India.
With interest rates at record lows (and widely tipped to go even lower in the short term), it is easy to see why mortgage holders are borrowing against their equity. Credit is so cheap at the moment. The problem will manifest when rates rise ... and they WILL rise at some stage.
Don't sign a contract unless you're certain you can meet the terms. Simple.