The equity on your home can replace the need to have a deposit, or it could even pay for an investment property in its entirety in terms of the lending.
In this article, we'll look at how you can make the most out of your home loan.
09 June 2022
Equity in a property is where for example, the home has a certain value. It’s been going up nicely over recent years. You also have a certain amount of lending against the home, usually the mortgage. Home equity is the difference between the value of the home and what you owe on it. It’s quite possible at the moment that people can have hundreds of thousands of dollars of equity.
This is particularly true if you have more than one property that has been going up in value. Now, that equity, the difference between the value of the home and the debt on it, is a figure which is nice to know you’ve got, but how could you use it to make a situation better in future? You see, if you sold your house, you would have that amount of cash, but otherwise it can’t really seem to be used for much. That’s where a home-equity loan comes in.
You can lend against that equity in your home. Why would people do this? Well, it could be to pay off some other debts that are at higher interest rates, because this loan will allow you to get the current interest rates on the home loan. As well as that people may want to refurbish or renovate, or maybe have to repair a house to the tune of tens of thousands of dollars. And you can do that by taking one of these loans. Another option for buying investment properties is to use that equity and your own home to lend against as a few, like a guarantee to the bank, that the situation for lending is going to be fine.
So that means that the equity on your home can replace the need to have a deposit, or it could even pay for an investment property in its entirety in terms of the lending. So you lend the money from the bank, it’s covered by your equity, and you’ve got an investment property. That’s how people do really well out of property because those values go up over time (they certainly do in this region) and then equity builds and they can lend against it to buy again. People think they have to have an actual deposit of cash or money available to buy an investment property. That’s not true. There are requirements you can check with your lender, but why not lend against the equity in your own home to work towards your future?