You didn’t rush into buying your home, so don’t attempt to access your equity without fully understanding the process.
The amount of equity in your home is determined by the difference between the market value of your home, and the amount you still have to repay on your mortgage. Put simply, the more you pay off your home loan, or as the value of your home increases, your equity grows.
Before you do a few quick sums and start planning what to do with your equity, you should consider that by accessing your equity, the total amount you’ll owe on your mortgage will increase, which can mean your repayments rise. What’s more, depending on the type of home loan you have, you may face restrictions which prevent you from taking advantage of your equity or even growing it by making extra repayments.
There are basically two main ways to make sure your equity grows, and that is by making changes around the house to ensure its value continues to grow or structuring your mortgage and repayments correctly.
Of course, it’s fair to think that all property values are slowly rising. If you want to give your property value a real kick-start, though, make some changes which ensure it will be viewed favourably by the market. Getting your renovations right will not only improve your quality of life now, but it will also mean that your property will be worth more.
A sure-fire way to increase your equity is to simply reduce the balance of your loan by increasing either the size and/or frequency of your repayments. Also, by opening an offset account, your savings are offset against your loan balance, reducing the interest you pay.
And if you know you’re going to regularly want to access your equity, look for a Line of Credit Loan. By making more regular repayments, the amount available for you to withdraw will automatically increase.
To work out how much equity you have in your home, it’s probably wise to get an up-to-date property valuation for the property.
To access your equity, you can re-borrow extra repayments if your loan features a redraw facility, or by topping up your loan balance. Greater Bank customers, where redraw is available on their Home Loan, can re-borrow extra repayments with free redraws via OnlineBanking.
Talk to your lender about how much equity you have in your home and the best way to access it.
If you’re over 60 and own your own home, you may also look to consider a Reverse Mortgage. This option allows you to make regular withdrawals on your home loan without having to sell your home.
Once you’re able to access your home’s equity, you can then use it for a number of purposes to improve both your financial outlook and your ongoing lifestyle.
The most common uses include:
Whether for your next home, an investment property or in other options such as shares or managed funds.
Need a new car or are overdue for a family holiday? Tap your equity and make it happen.
Family growing and need extra room, or have you always wanted a brand new pool and deck? Renovate using your equity.