For anyone looking at property investment, you’ve probably come across the term equity before. It’s a popular investment option in Australia and is one of the best ways to build your property portfolio. But what is equity?
It’s essentially the difference between what your property is worth, and the amount you still owe on it. So, if your property is worth $500,000, but you owe $400,000 on it still, then you have $100,000 in equity.
Darren Walters has more than 20 years’ experience in property and lending policies. And he has built a wealth of knowledge around utilising equity to invest. That’s why he’s put together this article highlighting everything you need to know about equity. And how you can use it to create wealth for you and your family.
How It Works
As explained above, equity can be summed up as the difference between what you owe the bank and the value of your property. But the truth is there’s a little more to it than that. For starters, most lenders will only consider up to 80% of that difference as available funds. Of course, there are some lenders who can utilise the full value for a loan. But they may charge you LMI and additional fees.
It’s also important to remember that equity isn’t tangible wealth. You can’t go withdraw it from the bank to spend as you like. The only way to utilise it is through banks and lenders with investment loans.
At No1 Property Guide, our Investment Specialists have experience in helping hundreds of homeowners utilise equity to buy investment properties. Combining this with Darren’s no or low deposit system is one of the best options for breaking into property investment in Australia.
How to Build Equity in Your Home
There are 2 ways you can build equity in your home.
The first is to keep on top of your mortgage repayments and put any extra money towards your home loan as well. This will reduce what you owe to the bank, building your equity over time.
The second way is to increase the value of your home. Luckily, property values tend to double every 10 to 15 years, which means your home is likely to build equity naturally over time. So, in 5-6 years, after adding capital growth and your regular mortgage repayments, you may have enough to break into the investment market.
Or, if you want to take some proactive steps towards building your equity. You can look to add value to your property yourself.
Renovations, extensions and additions, when done correctly, are a fantastic way to increase the value of your home. But you’ll want to consider the costs to ensure the value they add is more than you spent. Otherwise you may find it wasn’t worth it at all!
How to Use Equity in Your Home
When you’ve decided it’s time to utilise the equity in your home, your first step should be to contact No1 Property Guide. Our Investment Specialists and Mortgage Managers have extensive experience utilising home equity.
Because we deal with home equity loans regularly, we work with property valuers who can assess your home to get a true figure of what it’s worth. This allows us to accurately calculate your available equity.
We’ll then use that to find investment property options that suit your borrowing capacity and investment goals.
Another option, if you’d rather focus on improving your current property, is an equity loan for renovations. However, as we mentioned earlier, you’ll want to make sure the extra value from renovations is worth the added repayments and financial burden.
Benefits of Using Equity
There are many benefits of using home equity to fund your investment portfolio. Namely the accessibility, affordability, and flexibility it brings.
It’s available to anyone that has a property they’ve been paying off or that has gone through growth. This means there are plenty of options available and it’s accessible by a large portion of homeowners.
Generally, home equity loans are also affordable. Many lenders will charge lower interest rates and fees for these loans. Of course, if you’re looking to rent out your investment property, you’ll also have the payments covered by rent, making it even easier to afford!
Finally, they can be utilised in a variety of ways, giving you flexibility with how and where you use it.
Here at No1 Property Guide, we think using your equity to invest and build your property portfolio is the best option. Which is why we’ve to put together a team of specialists who are passionate about providing a complete range of property investment options utilising equity.
Getting Started is Easy
Getting started is easy thanks to Darren’s unique pre-qualification system. Simply fill in the pre-qualification form and one of our Investment Specialists will get in touch to discuss your factual investment options.
From there you can pick the investment property that suits you best. Our investment team can even source a property manager for you if you like!
Using equity is one of the best ways to invest and build your wealth. Don’t miss out on this chance!
Contact Darren Walters and the No1 Property Guide team today to get start your investment journey.