Unlock your equity
Property isn’t merely a physical roof over our heads – it’s also an investment that can serve as the key to achieving our financial goals. And the way to do this is by taking advantage of home equity.
If you have owned your property for some time and are currently considering investing in another, it may be possible to use the equity in your property to contribute to the investment purchase. Years of home ownership and steady mortgage repayments have been building equity in your property, turning your home into a tool you can use to positively impact your finances.
Unlock your equity can offer home owners the potential to build wealth and improve their lifestyle both now and in the long term.
What is home equity?
Home equity is simply the value of your property minus how much you still owe on the mortgage for that property. If, for example, your property is worth $500,000, but you still have $300,000 left to pay on your loan, this leaves you with equity of $200,000. The more of your loan you pay off, the more you’re building equity.
This isn’t the only way your equity will grow, however. As the value of your property increases over time, this will also increase your home equity. In the above example, you may have originally purchased the property for $400,000. In the course of paying off $100,000 off that loan, your home might have climbed in value by $100,000, expanding your home equity.
How can equity help you invest in property?
If you’re planning to purchase an investment property, the home equity on your current home can make the process easier.
With a standard mortgage, borrowing more than 80 per cent of the value of the property typically means you’re subject to lenders mortgage insurance (LMI). But if you tap into the equity in your existing property, because the excess is provided by your equity, you can borrow more than 80 per cent of the new home without having to pay LMI. Essentially, you can buy a second property without needing to put down a deposit.
In fact, if you have a high enough amount of home equity in your current property, you can borrow more than the full purchase price of the new property. This way, you can also cover added fees and expenses, such as:
- Stamp duty
- Property management fees
If you plan to unlock equity in order to purchase an investment property, the value of your existing home and the new property will be assessed to determine the amount of equity available.
What can you do with your home equity?
The great thing about unlocking your equity is that it can be used for a wide variety of purposes – not simply property investment.
For instance, if you want to make renovations to your property – add a beautifying feature, extend the space or perhaps install a granny flat for a passive income – your home equity can fund these works. This might be a more attractive option than refinancing your loan, or taking out a brand new one.
You can also use it to fund a range of lifestyle purchases. From a new car to a long-awaited holiday, as long as the lender will allow it, you can finance it when you unlock your equity. You can even have constant access to your home equity through the choice of bank card, cheque or other medium.
Finally, equity can be a useful instrument for the purpose of building wealth. Whether you want to open an investment portfolio and start investing in property, shares or even managed funds, you can use your equity as capital.
Unlocking your equity lets you access a range of opportunities that may otherwise be out of reach. The key is to decide how you want to access your money and what you will do with it once it has been unlocked.
Contact the friendly consultants at Future Financial or fill out the form below to find out what you can do with your home equity, and whether an equity loan is the right choice for you.
Your Home Your Mortgage:
A Home Buyers Guide
Your Mortgage Your Options:
A Home Owners Guide To Refinancing
From the moment you turn the key in the lock and take those first few steps through your new front door, the feeling of owning your own home is second to none.
Your Home Your Mortgage aims to arm home buyers and investors with essential know-how and proven techniques to ensure you avoid the common pitfalls of financing a property.
There’s no question the current mortgage environment is one of the most competitive in our nation’s history.
Refinancing provides Australians with a platform to get a better deal on their current mortgage, many of which may have been locked in some years ago at interest rates well above what’s on offer in today’s competitive market.