As a homeowner, not only is your property of the most value to you emotionally, it’s of the most value to you financially. In fact, you can use the value of your property to help boost your financial future, particularly by investing in a high growth property.
If you’re thinking about building your investment property and currently don’t have the cash for a home loan deposit, using a liquid asset is the best way to get your foot in the door.
Here’s how you can turn your existing home into a valuable asset that doesn’t just improve your quality of life on a day-to-day basis, but helps shore up your future goals too.
It’s all a matter of understanding equity, and how you can use it to tap into potential property market opportunities.
What is Home Equity?
Equity is the difference between the market value of your property, and the amount still owing on your mortgage.
If your home is worth $700,000, and you currently owe $250,000 on your mortgage, that means you have $450,000 in equity to access.
Using the equity on your home can help you achieve more of your financial goals a lot faster. For example, you can use the equity on your existing property as a deposit on another home loan, or to renovate your existing property.
How to Increase Your Home Equity
Building up the amount you can access is all down to a matter of how you improve the value of your property. Renovating and ensuring you maintain your property is one way to increase the market value of your home, and consequentially, grow your equity.
It also pays to increase the frequency of your payments. Not only can you offset the burden of interest rates, but larger, more frequent repayments will reduce the amount you owe, and increase the amount you can access.
How to Access Your Equity
The easiest way to access your home equity is via the redraw facility, as set up by your lender. The terms and conditions vary from lender to lender, particularly the interest rates applicable to your redraw.
You can also acquire an additional advance from your lender, but this can be an extra cost on top your additional mortgage.
Things to Consider
Using your home as equity is another financial commitment that can yield high returns for you in the long term, but is subject to a number of risks. When accessing your equity, think about:
- How much is my home worth, and is this likely to decrease any time soon?
- What’s my credit history like, and could this negatively affect my credit rating?
- Can I meet the repayments on another mortgage?
- What could happen if I couldn’t meet the arrangements on both mortgages? How can I ensure this is a sound financial decision that ensures my family’s future?
If you’d like to find out more about using your home equity, speaking to a professional can help you sort out the facts. If you’re ready to start your investment journey, get in touch with our team at OpenCorp – we’re only an email away!