August 14, 2013
What is ‘home equity’?
Home equity simply means the amount of ownership you have in your property. How do I work out my home equity? That’s easy. Home equity equals the market value of your home less the balance remaining on the loan. If your home is worth $500,000 and there’s $200,000 left on the loan, your home equity is worth $300,000.
Don’t I have to sell my property to access home equity?
No, there is a simple way to harness home equity and that’s by refinancing your home loan. Using the above example, refinancing the $200,000 loan to one worth $300,000 would make funds totalling $100,000 available to the home owner.
So...where’s the benefit in using home equity?
Home loan interest rates are normally well below the rates charged on other types of credit, making home equity a potentially low cost source of funds.
What can my home equity be used for?
That’s up to you however it makes sense to use this valuable asset for a worthwhile purpose like a deposit on a rental property or to fund major renovations that will enhance your home’s value and your lifestyle.
What are the costs involved?
Refinancing your mortgage can involve application and valuation fees on the new loan and any discharge fees on the old loan. We can explain exactly what costs you’ll be up for, though the opportunity to secure a lower rate or more flexible loan features can put you in front overall.
Is there a limit to how much home equity I can access?
The maximum amount you can borrow will be determined by your lender’s loan to valuation ratio. It’s essential that you are able to comfortably meet the repayments on your loan, so don’t be tempted to overextend yourself.
For more information, or assistance on unlocking the equity in your home - call me today on 0414 259 699