What is Home Equity?
So, what is home equity? Home equity is the difference between what you owe on your loan, and your home’s current market value.
For instance, if you have a home worth $600,000 and the balance remaining on your loan is $300,000, your home equity is worth $300,000. If your loan is $400,000, your equity is $200,000. If you own your home and have no mortgage, the full value of the property ($600,000) represents your home equity.
How can I use home equity?
From a financial perspective, your home equity is a valuable asset that can be just as good as cash in the bank. Instead of a cash deposit when purchasing an investment property, you can use your equity as security to the new investment. You may be able to use the equity to borrow to invest in a share portfolio or other form of wealth creation.
How you can grow home equity?
There are two ways to grow equity in your home; by paying off your loan, or an increase in property values.
There are ways to fast-track equity into your property.
Every time you pay more off your home loan, not only do you reduce the debt quicker, you also gain greater equity in your property. By paying the loan off quicker also reduces the overall interest you will pay, saving you money over the term of the loan.
Similarly, by conducting renovations you can increase your home’s value, and therefore your equity. This obviously may increase your debt, but if done smartly, can increase your equity more.
Accessing home equity
Accessing home equity is as easy as refinancing your mortgage, doing a redraw of any surplus funds you may have or taking out a mortgage for whatever purpose you’re looking for. However, home equity is not something to use without great thought. Remember, every time you access your home equity, the longer it will be before you own your property. Use your equity wisely!
Using home equity to do debt consolidation is useful, if done correctly. As a Debt Reduction Specialist, we can advise on when this is a good thing to do. The thing to consider here is, by using your property for other debts, may negate your ability to do property investing. You may need the equity you have to allow you to purchase an investment without using any of your own cash.
Don’t rush into things, we’re here to assist with all your financial needs and wants.
The Home Loan Comparison Co. compares home loans from a much wider variety of banks than most people have time to consider, and we find the loan that suits your goals.
We are experienced, knowledgeable and dedicated to building ongoing relationships to keep on providing personal and valuable service that is rarely experienced when dealing with the banks.