Westpac Bank

If your cash is tied up in your mortgage but you would like to have access to some extra funds for home renovations, investments or something special, a home equity loan may be useful. A home equity loan, such as Westpac's Equity Access is a line of credit loan which allows eligible borrowers to release the equity they have built up in their homes.

Westpac's Equity Access allows borrowers to access up to 80% of the value of their property, with a minimum loan amount of $25,000. Interest is charged at a variable rate and there is no minimum or maximum loan term. The loan works as an on-call facility so eligible borrowers can access their equity any time. Eligible borrowers can also apply to top up their loan should they need extra finance, but a top-up fee of $400 would apply.

Thinking about borrowing to invest in property? The range of home loan products available can be overwhelming, so always look into the features and fees of any loan before making your decision.

Westpac's Rocket Investment Loan includes a 100% offset transaction account which can help you to save on interest and possibly reduce your loan term. You pay your salary and invest property rental income into your account and your daily balance will be offset against the amount of your loan.

How does it work? Say you have a $200,000 home loan, your monthly income is $3000 and your rental property brings $1000 per month. With a Rocket Investment Loan, your salary and rental income is linked directly to your home loan account. So instead of owing interest on a loan of $200,000, once you have been paid the total of $4000 (your salary plus rental income) into your offset account, you will owe interest on only $196,000.

Banks charge interest daily, so the balance of your account is deducted from the balance of your Rocket Investment Loan before the interest is calculated. The compound effect of the reduced interest charges can cut the term of your loan.

Beware of fees that can dissolve the benefits of an offset account. For example, Westpac's Rocket Investment Loan carries an establishment fee of $750 and will cost you $199 per year in account service fees.

Westpac offer Rocket Investment borrowers the option to take a holiday from repayments, but first you have to build up extra equity in your loan account by making additional repayments. You need to have enough excess in your account to cover the required repayments, so perhaps it's really not much of a holiday at all.

Using a mortgage offset account is a tax-effective way of managing your income, but it is usually only available with higher standard variable interest rate home loans, not the basic, lower-interest loans. The Westpac Rocket Investment Loan has a higher interest rate than many other Westpac products, so it's important to weigh up a number of options from different lenders before deciding whether an offset account such as this is right for you.

We all know what's meant by low interest rates and low account fees, but have you ever wondered what exactly is meant by a Low Doc loan?

Low Doc home loans, such as the options offered by Westpac, are considered an express way of cutting through the paperwork associated with home loan applications. Applicants go through the normal application process, with the difference being that a signed Borrowers Income Declaration is the only documentation required to show proof of income. It's known as a 'Low Doc' process.

Westpac's Low Doc loan options could be advantageous for borrowers who are contractors, self employed or have a small business, or generally those people with income and assets who may not be able to provide the necessary paperwork to qualify for a standard home loan.

Westpac offer a Low Doc option on a range of their loans, including Premium Option Home Loans, Fixed Options Home Loan (3, 4 and 5 years only), Variable Rate Investment Property Loans, Fixed Rate Investment Property Loan (3, 4 and 5 years only) and Equity Access Loans.

Generally, the standard variable rate applies to the Low Doc loans offered by Westpac, obviously with the exception of the fixed rate options. There is more to any loan than simply interest rate, so be sure to find out about the features of any loan before you make a commitment.

If you need access to a redraw facility, an offset account, the ability to make extra repayments or repay your loan in full, find out whether your preferred loan can offer you these features before being enticed by the relative ease of a Low Doc loan application.

Westpac advise that during the first three years of your Low Doc loan, you may not be able to switch to any of their other loan products. This means that although a Low Doc option may be easier to obtain than other loans, it could restrict your flexibility should you wish to explore other loan options.

Generally, having less documentation usually equates to increased risk for lenders, so many Lo Doc products offer fewer features and stricter limitations than standard loans. Most Lo Doc loans also require lenders mortgage insurance which can add to the cost considerably.

Before applying for a Low Doc home loan, be sure you understand the conditions of your loan. Find out the details of any special features offered, and read the fine print to learn about any limitations that a Low Doc home loan may put on your financial future.