Your home equity can be used to invest in other property or upgrade or renovate your existing home.
What is equity?
Equity is calculated by subtracting the amount you owe on your mortgage from the market value of your home, which can be determined by a home valuation. A valuation will assess your land, property size, its conditions, features and more.
How to build equity
If your goal is to build equity, you will need to be patient as it won’t happen overnight. Generally speaking, property values increase over the long-term and, coupled with regular home repayments will allow you to build your equity.
Making extra repayments on your mortgage will help you build equity faster so you may want to consider switching to fortnightly instead of monthly repayments, which add up to one extra monthly repayment a year. Alternatively, try to put any extra lump sum repayments such as tax returns or employer bonuses into your mortgage.
Increasing the value of property is another way homeowners build equity. Cosmetic improvements such as landscaping, gardening and a new lick of paint are a simple way to add value to your home. Significant structural upgrades such as building more rooms, adding a second storey or building a granny flat can also help raise your home’s value. Of course, there are costs involved in major renovations so you will need to consider the return on investment before getting started.
Why access your home equity?
If you have a redraw facility attached to your home loan you may be able to access your equity and any extra home loan repayments you’ve made.
Once you’ve accrued equity you may want to access it to help finance a renovation, upgrade your home or purchase an investment property.
You may be able to use the equity in your home as a deposit towards an investment property. If you have enough equity, it may cover a 20% deposit.
You can also access your equity to take out a line of credit, which you can secure against your property.