If you have a home loan and have been paying it off for some time, you may have access to equity in your home. Explained simply, equity is the difference between the current value of your property and the amount still owed on it. For example, with a $400,000 mortgage that has $100,000 paid off, you could potentially have up to $100,000 of unlocked equity.
As a home loan is paid off, gradually the part of the property that is owned increases. This is called collateral and can be used to finance other assets like the purchase of a new car, or to pay for renovations. Another way to use your equity is for a down payment on an investment property. If you already own a property and want to purchase an investment property but don’t have a deposit, the lender will use the equity that you have built in your current home loan as a deposit for the new loan.
Similarly, if you’re looking to build a property portfolio, this too can be done through the use of equity. Once you have built up equity in your first property you can then look to use that equity to refinance and purchase another property and so on.
If you have any questions on accessing equity in your home or investment properties, please give us an obligation free call.