What is home equity and what can it be used for?

What is equity in property, you ask? Equity is the difference between the value of your property and the outstanding balance on your home loan. You gain equity as you pay back your loan and as the value of your property increases (through improvement or growth).

The cool part is, once you have equity in your property, you can use it to access extra funds by borrowing against the value of your property. It’s up to you what you use it for, but you might like to use it to:

  • Renovate your home
  • Use as a deposit for your next property purchase
  • Invest in shares
  • Buy a new car.

Benefits of accessing equity in your home

Accessing home equity is a handy way to get the extra funds you need without dipping into your hard-earned savings. It can be a cost-effective way to borrow, given the interest rate may be lower than that of a credit card or a personal loan.

It’s also popular with investors looking at using equity to buy a house. If you have dreams of building your property portfolio, you can get a deposit ready for your next property purchase by using the equity you’ve built up in your existing property. That way you may not need to wait and save up for years again, if you’ve already found that dream property.

How does accessing home equity work?

Once you have equity in your home, there are a few different ways you can access it. These include:

  • Topping up your home loan
  • Taking out a new loan against your property
  • Refinancing your home loan

The approach that works best for you could depend on a range of factors such as your current financial situation, the value of your property, how much you are looking to borrow and the circumstances of your current home loan. We would need to conduct a full credit assessment to allow you to borrow against the value of your property.

How can I increase my equity?

The great thing about equity is that it can grow. And you can give it a helping hand.

An obvious way to increase your equity is by paying down the amount you owe on your home loan. By lowering the balance of your loan, you’re increasing the difference between the amount you owe and the value of your property. This difference is your equity.

Increasing the value of your home also grows your equity. The value of your home can increase through growth in the market, or you can improve the value of your property through extensions or renovations. The more your house is worth compared to your loan balance, the more equity you have.


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