How To Access Home Equity

How To Access Home Equity

You make your mortgage payment on time. You take pride in your home, with scented candles and remembering to change the oven clock when daylight saving ends.

You may have accrued some equity. That’s the difference, in dollars, between how much you owe (your home loan) and how much your home is worth. So, if you’ve paid down your loan to $250,000 and your home is worth $550,000, that’s $300,000 in money that’s yours – not the bank’s.

How can you access the equity in your house and put it to good use? Let’s find out.

1. Find out how much equity you have.

This is a pretty important step. First, you’ll need to have a property valuation done. A valuer will come to your home and look at things like the condition of your property, how big it is, where it’s located and how many kinds of cereal you have. There may be a fee to do this.

Then, find out the remaining balance of your home loan, grab your calculator and BODMAS it up. The difference between the two numbers is your available equity.

2. Know what you want to use it for.

Even though it can seem like free money, the equity in your home is the result of your hard work. Think carefully about if you want to use it or how you might spend it, to add value to your existing home, or improve your lifestyle in ways like:

  • Renovations or refurbishments on your existing home.
  • Investing outside of property, like in shares.
  • Putting down a deposit on an investment property.
  • Buying a new car, or taking the fam on a holiday.

3. Redraw from your loan.

If you’re ahead with repayments, you might be able to use redraw to dip into your equity. That means accessing the extra capital you’ve paid down, not the entire balance of your equity, so you’re limited to the value of those additional repayments. That may not be enough if you’re planning something big like a home renovation.

You could also consider a loan top up (asking to add a bit more onto the balance of your loan and using the money to further invest. If this sounds like an option for you, get in touch with us so we can evaluate your current situation.

4. Refinance your home loan.

Two of the reasons you may look at refinancing your home loan to access equity are:

1. You can tap into the funds you need.

2. It’s a chance to secure a more competitive rate.

Yes, refinancing does take a bit more effort than a loan top up or asking a kind billionaire but it could mean savings with a lower rate, better loan features or just the pleasure of talking with us again.

5. Avoid putting yourself under financial stress.

You know when you were a kid and you had five dollars and you wanted to spend it so badly your whole body hurt? But your parents made you save it so you could “learn”?

Just because you have equity, doesn’t mean you have to use it. Your access to it will depend on your current income, financial history, living expenses and the amount owing. There may also be additional fees associated, and, of course, using your equity means your home loan balance will increase.

This page provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.

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