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.
Good news: you’ve probably 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. To work this out you’ll need to have a lending specialist access a property report for you – or have a lender valuation completed. Either way a lending specialist can arrange this for you – normally at no cost to you!
If you get a lender 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. The valuation may also be completed “virtually” where the valuer uses functions like google maps to view your property.
Once the valuation is completed a lending specialist will look at the remaining balance of your home loan and 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 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
Related Post: How much of the housing market can different incomes buy?
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. This is as easy as getting in touch with a lending specialist who can help you consider all options – and review your home loan at the same time.
4. Refinance your home loan
Refinancing your home loan to access equity can be great for two reasons:
- You can tap into the funds you need
- It’s a chance to secure a better deal than your current home loan
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 a great new lender.
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.
What should be your first step?
Pretty simple. Best first step is to have a lending specialist review your equity and your borrowing power. If you know what’s possible, you can consider all your options.
It’s a free service. If you decide to fact find but sit on the info – that’s ok. Hopefully the property market keeps driving up your equity! If you want to push the “go button” you’ll do so knowing exactly where you’re going!
It’s easy to connect with one of our local lending specialists and we’re available via phone, chat, or in person.
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This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.