Just what is equity anyway?

News & Information

Lets Finance Investment Specialist gives you some tips on Equity in your property and how you can use it!

Run the numbers

If you own a property, whether it’s an investment or your owner-occupied home, your equity is the current agreed value of your property, minus any loans you have secured against it. So, let’s say you house is now worth $650,000. Your current mortgage balance is $450,000. So, the equity you have in your house is $200,000.

Of course, you can sell your home and keep the money or buy another property. But you also could refinance instead, to access your equity. How much you can increase your borrowing will depend on quite a few things – from your financial position to what you want to use the money for.

What’s it worth?

When refinancing your lender will get a valuation for your property to determine how much you can borrow. So, before you start making plans, get a good understanding how much your home is worth, but be aware that each bank will send out their own valuer.

Also, if the value of your home is $200,000 more then what you owe, you cannot use all this equity. Some lenders let you borrow up to 90% of the property when refinancing. So, if your property is valued at $650,000, You could borrow up to $585,000 against it. But if borrowing more than 80% of the property value, you have to consider the cost of lenders mortgage insurance, which protects the lender in case anything happens and you cannot repay the loan.

Lose the debt

So now that you know what equity is, what can you do with it? You could pay out borrowings which attract a higher interest rate, like a car loan a personal loan or your credit card or all of them. This is known as debt consolidation.

Invest

Getting rid of debt can certainly save you money in the long term. But you could also use your equity  to buy an investment property and start making some money this way. You might think you need a lot of wealth to own multiple properties but this isn’t always the case. Investing on a budget is possible if you get the right finance in place with help from an experienced broker.

Renovate

If you were always planning to renovate your bathroom or get this nice chef kitchen, add another room or a patio or really any other renovation you can use equity for them. Refinancing is only one of the ways to fund a renovation project, but it can be a very affordable solution. If you are planning on Major renovations with your plans and quotes, a valuer can work out what the value of your home will be once completed.

Help the next generation

If your kids are ready to get their own home but are struggling to save a deposit for a home, using equity in your property as security for theirs is one option and can help them buy their first home sooner.

At Let’s finance we can help you make the most of your equity

 

Category: News & Information