Your clients can access funds from their existing home loan in many ways. It would depend on their personal circumstances and financial goals, but here are the three ways in which they could use their bond.
1. Further Advance
A further advance, also known as a further loan, is an additional amount, over and above the amount your client originally registered when taking out their home loan. This can be accessed if the value of the property has increased. If the value hasn’t increased, but they are planning in increasing it, they may then apply for further advance building loan.
- They could use the funds for home improvements, renovations or building work, or to fund another big ticket item.
- Approval is subject to a credit assessment and property valuation.
- There will be bond attorney fees payable as they will now be registering a higher amount at the Deeds Office.
- Taking a further loan could affect the interest rate on their home loan.
- Some banks require the client to contact them directly for a further advance, due to their in-house processes. So, the application process for a further advance will depend on the bank where the home loan account is held.
2. Re-Advance
Re-Advance means accessing the money they have already paid into their home loan account since registration.
- It is the difference between the registered bond amount and the current outstanding balance.
- There are no attorney fees payable.
- Approval is subject to a credit assessment and property valuation.
- Taking a re-advance could affect the interest rate on the home loan.
- They apply for a re-advance directly with the bank that granted their home loan – not through a bond originator.
3. Access facility
This is a facility that allows the client to access any surplus funds that have accumulated in their home loan account by paying more than the minimum monthly installment and / or paying a lump sum into the account.
- Most banks will grant an access facility automatically upon registration of your bond, but it’s worth checking with the bank and then applying for it, if needed.
- Some banks may require a transactional account with them, while others will arrange for the funds to be transferred between banks.
It’s helpful to think of a home loan account as a regular bank account and a good idea not to close it once the bond is paid off. It could be worth keeping open for the purpose of accessing funds again in future. For example, if they wanted to buy property again, they could access funds on the existing bond or property, to help pay a deposit or perhaps finance a new purchase. They should just let the bank know and remember that there may be a small admin fee involved, which differs between banks.
