For many South Africans, property ownership is more than just a roof over your head – it is one of the most powerful financial assets you can have. As your home’s value grows and your bond decreases, you build home equity, which is a form of wealth that you can actually tap into when you need access to funds. 

But what does home equity really mean, and how can you use it responsibly to unlock credit? 

Let’s break it down so that you can make an informed decision. 

What Exactly Is Home Equity? 

Home equity is the difference between what your home is worth and how much you still owe on your bond. 

For example, if your house is valued at R2 million and your remaining bond balance is R1.2 million, then your home equity is R800,000. That is the portion of your home that you truly own, and it can serve as collateral when you want to access credit through your bank or lender. 

How To Access Credit Through Home Equity 

In South Africa, there are two main ways to use your home equity to access funds. Before we dive into each option, we should remind you that whichever you opt for, both rely on your repayment history, income stability, and the current market value of your home. Your lender will also conduct a property valuation before approving any additional credit. 

Option 1: Re-advance on your existing bond. If you have been paying off your home loan for a few years, you may qualify to borrow again up to your original bond amount. For example, if you took out a R1.5 million bond and have paid it down to R1 million, you can apply to access that R500,000 difference. 

Option 2: Further loan or second bond. This is when you take out an additional loan using your property as security. It works much like your first bond but may come with slightly higher interest rates or shorter repayment terms. 

Why Homeowners Use Their Equity 

Using your home equity can be a smart financial move if it is done carefully and for the right reasons.  

Many South Africans use equity loans for: 

• Home improvements or renovations that increase property value. 

• Education expenses or other long-term investments. 

• Debt consolidation, where you combine high-interest debts (like credit cards or personal loans) into one lower-rate bond-linked loan. 

• Starting a business or investing in property. 

Because these loans are secured by your property, they often come with lower interest rates compared to unsecured loans. 

The Risks Of Borrowing Against Your Home 

While using home equity can unlock valuable financial flexibility, it is not without risk. Remember, your property serves as collateral which means that if you fall behind on repayments, your home could ultimately be at risk. 

It is also worth noting that extending your bond means extending your repayment period. Even if your monthly instalment looks manageable, the total amount you pay overtime could be higher due to interest. 

That is why it is important to review your total debt obligations before applying. In doing so, you can ensure that you only borrow what you genuinely need. With this key information in mind, you can go on to compare interest rates and fees between banks. All in all, you can be intentional about creating a clear plan for how the funds will be used and repaid. 

How To Build More Home Equity 

If you want to strengthen your financial position and create more borrowing potential, here are a few ways to increase your home equity over time. 

• Make extra bond payments: Even a few hundred rand more each month can cut years off your loan term and grow your equity faster. 

• Renovate strategically: Focus on upgrades that add long-term value, like energy efficiency or modernised kitchens and bathrooms. 

• Avoid over-borrowing: Keep your debt-to-income ratio low to maintain strong financial standing with lenders. 

• Hold your property longer: Equity generally increases over time as your home appreciates in value. 

Feeling Informed? 

Home equity is a powerful financial tool… if managed wisely. It can help you fund life’s big moments, consolidate debt, or invest in your future, all while building long-term wealth. 

That said, before you apply for a re-advance or second bond, speak to your bank or financial advisor to fully understand the costs, risks, and repayment structure. Used responsibly, your property could be the key to unlocking new financial opportunities without having to sell it. 

To explore home finance options and compare lender offers, visit the AA Inform home finance comparison tool and find out what your property could do for you.