If you’ve owned a property for a few years, there’s a good chance that you’ve amassed useable equity. This can be used to fund the purchase of an investment property or bach, to renovate your current home, and much more.
With that in mind, let’s take a closer look at what useable equity is and discuss how you can make it work for you.
What is useable equity?
Equity is the difference between the value of your home and the amount you still owe your bank or lender for your home loan. Useable equity, on the other hand, is the amount of equity you have in your home that you can use to access further credit.
In most cases, you will need to keep at least 20% equity in your home. For investment properties, you may need to keep 35% equity due to bank regulations. Anything over that percentage, however, is useable equity.
To get the ball rolling, all you’ll need to do is speak to a mortgage broker who will find out more about your financial position and your home, as well as whatever you want to use the equity for. From there, they’ll ‘unlock’ the equity, increasing your home loan amount and giving you a decent chunk of cash to put towards whatever you’d like.
How can you make useable equity work for you?
Useable equity increases in two ways – when you repay the principal on your home loan, and when your property increases in value. If you’ve bought property in a fast growing area or recently completed renovations, there’s a good chance you’ve got plenty of useable equity.
Here are a few popular ways to use the equity in your home:
- Purchasing an investment property.
- Completing home renovations or additions.
- Buying a car or boat.
- Going on a holiday.
- Consolidating other debt.
Keep in mind when you unlock equity in your home, you are increasing the amount of your loan and you will have to make both interest and principal repayments. With that said, the loan will have a lower interest rate than a credit card or personal loan, allow you to spread repayments over a longer time and keep repayments simple by rolling them all into one.
If you’re keen to find out more about how you can use the equity in your property, get in touch with a mortgage broker Money Empire today for a no obligation chat.