Accessing the equity in your home
If you’ve owned your home for a while, there’s a chance you’ve built up some equity. That’s the difference between your property’s current value and what you still owe on your home loan.
Some people choose to access this equity to fund renovations, consolidate debt or cover other expenses. This article explains how home equity works and outlines a few ways it may be accessed.
What is home equity?
Home equity is the portion of your property that you own outright. For example, if your home is valued at $800,000 and your loan balance is $500,000, your equity is $300,000.
How equity can be accessed
There are a few common ways people access the equity in their home:
Refinancing
Redraw facility
Additional advance
Each option has different eligibility criteria and may involve fees or changes to your loan terms.
Things to consider
Before accessing your equity, it’s important to think about:
Your financial goals
Repayment capacity
Loan structure
Costs and fees
Capitalising on the equity in your home
You might be able to take advantage of your home equity in several ways:
Buying an investment property
One option could be to refinance your current home loan and use the equity to buy an investment property. The rent you receive may help cover loan repayments, provide funds to invest further and potentially result in capital gains over time. And remember, always speak to a licensed financial or tax adviser before making any investment decisions.
Renovating your home
Looking to improve your existing home? Accessing your equity could help turn those renovation goals into a reality. When done properly, renovations can increase the value of your property. It’s important not to make improvements that cost more than the value they’ll add to your property. This is known as overcapitalisation.
Accessing cash out
Whether you’re looking to pay off some outstanding debts, pay for upcoming study or purchase a new car or caravan, the power of your equity can be impressive. Just be sure to understand the impact on your loan and repayments before proceeding.
How Pepper Money may be able to help
At Pepper Money, we take a real-life approach to lending. We understand that your financial journey is unique, and we’ll look at your full story when assessing your application.
To learn more, visit our home loans page or speak with a lending specialist on 137 377.
Contributor | Barry Saoud, General Manager, Mortgages and Commercial Lending
Barry joined Pepper Money in July 2021 as General Manager, Mortgages and Commercial Lending. He is responsible for the strategic direction and operating performance across product, credit, and settlements for mortgages, commercial loans, personal loans, and direct sales. Read more.
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Need some help with your refinancing?
There's a lot refinancing can do; from unlocking your equity to consolidating debts in to your home loan.
Some great resources are here to help you understand your options.
Information provided is factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser.
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