Ways to use a further loan

You can use a further loan for anything you like. Just remember that there are two types of further loans – ordinary and building.

When it comes to an ordinary further loan, you can use it for cosmetic changes to your property such as painting or paving. You can install solar or other energy-efficient measures at your home. It could be a deposit on another property, making it possible to buy an investment property, or purchase a piece of land on which to build later. It could also go towards big ticket items like an overseas holiday or to pay for a child's tertiary education.

You can use a building further loan for something related to building. For example, your existing bond was used for the purchase of a vacant stand and now you want to build a home on the stand. Or, you want to add a bedroom, bathroom or garage, or put in a swimming pool at your existing home.

How long does it take?

The good news is that it is usually quicker to finalise a further loan than a new bond. This is because it doesn't involve a transfer.

What does it cost?

It is important to understand the costs associated with this type of loan. You also need to be aware of the consequences of not keeping up with your repayments. It requires you to register another home loan. This means that there will be valuation fees and bond registration costs. Make sure you budget for these. Keep in mind that in some cases the bank can adjust the interest rate. Don't assume it will be the same as the original rate concession.

The bank secures and grants a further loan against your existing property. It's important to make sure you can afford the additional payments that come with it. If not, you risk losing your property, which could cost you dearly.

Debt consolidation

If debt consolidation is your main priority, you may want to look at other options than doing it by way of a further loan on your existing home loan. It is true that you will more than likely get a lower interest rate than on a personal loan, but in the long run you could end up paying a lot more. Ask your financial advisor to do these calculations for you and compare carefully before deciding to use it for debt consolidation.