If you’ve been consistently paying your mortgage for a few years, you may have accumulated equity in your home that could be put to use. Still not sure exactly what equity is or how to use it? We’ve got you covered.
What is equity?
By definition, equity is the difference between the current value of your property and the value of your mortgage. It’s the portion of your home that you’ve paid off. Equity can provide opportunities to grow your wealth; as the value of your home increases and you pay down the principal amount of your mortgage, your equity will continue to grow.
3 ways to make the most of your equity
Investment property
This is the most common use of equity. Equity can be used in place of a deposit, so you could potentially avoid the process of saving for a deposit when looking to purchase an investment property. Your lender may request a valuation to assess your property in its current market which can determine how much equity you have.
However, lenders will also consider various factors such as your income, children, living expenses, debts and more. Our in-house finance team at Resolve Finance can assist in liaising with your lender to secure the most equity possible.
Renovate your home
Alternatively, instead of looking for a new property, you could invest in your current home. Renovations could increase the property’s value and even catch the eye of prospective buyers if you sell.
Speak to your broker first before considering using your equity to renovate, they can help you determine if this is the best option depending on your current situation.
Debt consolidation
If you have other personal debts, such as car or personal loans, and are finding it difficult to make the payments, it may be easier to consolidate that debt to a lower interest rate and pay it down using your equity. Doing this combines multiple debts into one easy payment that can be easier to manage.
