March 23, 2018 by Daniel Meade
What is home equity?
If you own your home or an investment property, chances are you have some home equity – and it could be a surprisingly useful financial tool.
Your home equity is the difference between your property's market value and the balance of your mortgage. If you've owned your home for a few years, there's a good chance you've built up some reasonable equity, and this can be a valuable resource when it comes to property investment.
Refinancing is often a tactic used to free up the equity you have in your current home in order to fund purchases or lifestyle goals.
Home equity can build up over time
One of the great aspects of home equity is that it tends to increase over time - often without any effort on behalf of the home owner. A well-chosen property should rise in value over the long term, and by steadily paying off your loan, the value of your mortgage decreases. The growing gap between the two – the property’s value and the loan, represents the ongoing increase in your home equity.
Accessing home equity
Not so long ago the only way home owners could access their home equity was by selling up and upgrading to another property.
These days, mortgages are very flexible, and it’s possible to make use of home equity without the need to sell a much-loved home. It’s often achieved by refinancing your current home loan and using the funds provided from the newly enlarged loan to achieve a range of personal goals.
A flexible range of uses
As a guide, home equity can be used as a source of low cost funding for a new car, home improvements, a special holiday – in fact just about whatever purpose you choose. As home loan interest rates are generally much cheaper than other types of credit, like a personal loan, home equity can offer a very affordable source of funding.
It’s also possible to use home equity to grow your wealth. Some home owners for instance choose to use their equity as a deposit on a rental property. This expands your property ownership and provides a source of rental income, which can be used to pay down the loan.
We can help with accessing your equity, every step of the way, so please contact the office on 3833 9666 to arrange an appointment to discuss.
