Borrowing Cash against Your Property

I’m not quite sure if I’ll publish that one before this one, but in another post I go on and on about how the home you buy isn’t really the investment it’s made out to be and by no means is that a contradictory view to the main point expressed in this particular post. In that instance I’m specifically talking about a property which you purchase so that you can reside in it as your primary or only residence and not necessarily about any other type of property.

After all, if you do indeed plan for your primary residence to generate you some form of revenue then to a certain extent it can be referred to as an investment. The money you’d generate thereof however would likely not be pure profit, unless of course you’ve already paid the property off in full. Rather, it would go towards paying the property off or towards its maintenance costs.

Anyway, all of that was leading up to one important feature of owning property, which is that of having access to capital. This applies even to those who are still paying off their property, that being the fact that as long as you have property then you have access to some credit in the form of a loan against your property.

The loan amount you’ll qualify for if you do indeed qualify at all will depend on a couple of factors, one of which is how far and long you are in paying off the mortgage for your property. The other factor is your record, i.e. if you’ve been meeting your repayment terms as per the agreement of the mortgage.

While this makes for a great prospect for anyone reading this who might own their own property or indeed if they’re paying off a mortgage, the logistics of it are a little bit more complicated. It’s not a simple matter of effectively getting an extension on your mortgage because the interest rates have to be adjusted so that they make for a closer match to a regular loan. So the interest rates you’d be quoted will then fall somewhere between the bank REPO rate and the interest rates on your mortgage, but never quite explicitly matching one or the other.

That said however, you still get great borrowing rates against your property and based on your credit rating you could negotiate a great little sub-deal. For example, when everything is aggregated and simplified, what the loan you get against your property could mean is that no difference is made to your overall mortgage, so long as you honor the repayments agreed upon in good time.

The ability to borrow cash against your property by effectively extending your mortgage is a privilege amongst homeowners as well as buyers who are working towards paying off their property, but unfortunately this appears to be a secret many property buyers aren’t in on.

On the flip side adding a little bit more to your bond repayments could help you markedly reduce the time over which you pay off the property, so too the total amount you spend on interests.