Using Equity in Your Home

Friday, July 3, 2009

Buying your own home is probably the biggest investment you’ll ever make. Your home is also likely to be your biggest asset. Why not put this asset to work by taking out a home equity loan?
What is equity?

Equity is simply the difference between what your property is worth and what you owe. For example, if you have $200,000 to pay off on a home worth $500,000, you have $300,000 worth of equity. You may be able to borrow against this amount to renovate, invest in shares or managed funds, buy another property or refinance your mortgage.
How it works

An equity home loan gives you a line of credit on your mortgage up to an approved amount. The loan can be taken in full or in stages, making it particularly useful for renovating or investing.

How much you can borrow depends on your situation - your existing borrowings, income and assets are taken into account. And if the equity is for an investment property, your new and current property values will be assessed.
Benefits

Saving for renovations or a deposit can take time. Taking out an equity home loan means you can start your renovations or buy an investment property sooner.

However, it is important to remember that all debt needs to be carefully managed to maximise investment returns and minimise risks.

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