That Home Loan Hub
Welcome to That Home Loan Hub, your ultimate guide to mastering the world of home loans and property. I'm Zebunisso Alimova, here to simplify the complexities of real estate and provide you with expert insights and the latest trends.
Whether you're a first-time homebuyer, an experienced investor, or simply curious about the property market, this podcast is for you. Join me each week as we unlock the secrets to property success and help you make informed decisions. Let's dive into the world of property together!
That Home Loan Hub
Unlocking Home Equity: Is a Top-Up Loan Right for You?
Wondering whether that home renovation, debt consolidation, or family holiday should be funded through your mortgage? This eye-opening episode cuts through the confusion surrounding top-up loans - one of 2025's hottest financial topics.
We unpack what exactly happens when you borrow against your home equity, highlighting both the opportunities and pitfalls that come with accessing this powerful financial tool. Your house might be sitting on significant untapped value, but accessing that equity comes with long-term consequences that aren't always obvious at first glance.
The math tells a sobering story: that $30,000 renovation financed at 6.9% over 25 years will actually cost you $64,000 in total repayments. Yet structured properly, top-up loans can transform high-interest debt into manageable repayments or add genuine value to your property. Through real-world examples, we share how one client reduced their monthly payments by $220 while setting up a clear 7-year repayment plan rather than stretching their debt across decades.
Whether you're considering a top-up or just exploring your options, this episode provides the concrete strategies you need to make informed decisions. Learn what banks really look for in applications, how to structure repayments to minimize interest, and when to walk away from seemingly "easy" money. Ready to use your home's equity wisely? Join us every fortnight for more insights that will empower your financial journey.
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Kia ora and welcome back to the Home Loan Hub. Today we're going to dive into a hot topic that's become more and more common in 2025. Top-up loans. You might have heard a friend say they're getting a bit more out of their mortgage or borrowing against their equity for renovations or a holiday. But what exactly is a top-up loan, and is it a smart move or is it a debt trap in disguise? Let's break it down. What's a top up loan? A top up is when you borrow additional money on top of your existing home loan, using the equity in your property as security. So, for example, say your house is worth $800,000 and your mortgage is $500,000. That means you've got about $300,000 in equity. We can only lend up to 80%, so you might be able to borrow a portion of that, depending on the bank's criteria. People top up for all kinds of reasons. I've seen renovations. I've seen debt consolidations, starting a business, even helping their kids with a deposit. It sounds simple and it can be, but just because it's available doesn't mean it's always a good idea. So when does a top-up is a good idea?
Speaker 1:A top-up can be a great tool when it adds value or improves your financial position long-term. So, for example, renovating your kitchen or a bathroom to boost resale value, replacing high interest credit cards or personal loans with one or a lower home loan rate, finding necessary medical treatment or education if you have a solid repayment plan. I've helped clients use top-ups to build sleepouts at bedrooms or consolidate debts from 20% down to 6%. That's powerful, but only if it's paired with a financial discipline. Now, when does it become a trap? Now, here is where I put my advisor hat on and I say be careful.
Speaker 1:A top-up loan can easily turn into a long-term debt trap. If you're using it to fund lifestyle spending so holidays, cars, shopping. If you're spending outside your means, if you're adding $20,000 to your loan for something that depreciates immediately, if you're stretching repayments over 25 or 30 years just to make it. Let's look at the math. If you top up $30,000 at 6.9% interest over 25 years, your payments might feel manageable say, around $215 a fortnight but in total you'll pay over $64,000 back to the bank. That's double of what you borrowed. We don't want you to do that. So what do banks look out for? A top-up isn't always guaranteed, and here's what the lenders look at how much equity have you got? Most of the banks will want you to stay under 80% LVR. We also look at your income and expenses. Can you afford the higher repayments? We'll look at your credit history. Have you missed repayments or had arrears? You might also need updated pay slips, bank statements and a quote or an invoice if it's for renovation. And one thing to remember every time you apply for credit, it leaves a mark on your credit report. So don't apply casually. Be strategic. And if you haven't listened to my podcast about the credit scores that we've just done, please go back and listen to that. Very important information was shared in that one.
Speaker 1:Now, if you're considering a top-up, here are my top tips. Have a clear purpose. What exactly is the money for and how will it help you Keep it on short term, even if it's 20k for a bathroom? Don't pay it off over 30 years. We usually schedule it at around 5 to 7 year loan structure. Don't bundle it blindly. Some lenders add the top up to your main loan, stretching it over the full term. That makes it feel cheaper, but you pay it more in the long run.
Speaker 1:And work with an advisor. A good advisor, hey, like me, can help structure it in a way that makes financial sense, not just what's easiest. And look, I had a client last year who wanted to consolidate 40K of high interest debt into their mortgage. They were paying over $1,000 a month across four credit cards. We've restructured it as a top-up, fixed for five years at 6.6% and their payments dropped to 780 a month, with a clear plan to pay it off under seven years. The key we didn't stretch it across 30 years. We kept it lean and goal-focused and affordable. That's the difference between leveraging your equity wisely and falling into a debt spiral.
Speaker 1:Look, top-up loans can be empowering, but they can come with a huge responsibility. If you treat them like a credit card with a bigger limit, they'll cost you more than you think. But if you use them strategically with a plan, you can unlock potential in your home and in your finances. If you're thinking of topping up or just want a second opinion, reach out. I'm here to help you structure it right, not just make it fit. And look, don't forget, every fortnight, on a Thursday, I run a webinar. You can drop me a comment if you want me to expand on a certain topic and I'll be more than happy to help you out. Until next time, stay informed, stay empowered and keep making smart money moves, see ya.
