Accessing the equity in your home

Estimated read time: 3 Minutes
Looking to invest in more property? Perhaps you're thinking about renovating a new bathroom or kitchen. Maybe you’re even considering going back to uni. These are just a few reasons you might want to access the equity in your home loan.
Whatever the reason, releasing equity from your home loan could be a savvy way to help bring those dreams to life.
What is equity?
Equity is the market value of your property minus what you owe on your home loan. It's roughly the amount you’d receive if you were to sell your property and pay off your mortgage. What some people don’t realise is you might be able to tap into these funds without selling your property.
How do you calculate equity?
Let’s say your home is worth $500,000 and you have $200,000 outstanding on your mortgage. That means you have approximately $300,000 in equity.
How can you increase equity?
There are several ways that equity in your property can change – either through improvements you’ve made, market fluctuations, or extra payments.
Capitalising on the equity in your home
You can take advantage of your home equity in several ways:
Buying an investment property
Once option could be to refinance your current home loan and use the equity to buy an investment property. The rent you receive could help pay off your home loan, give you funds to invest further, and you may even enjoy capital gains over time.
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!
Tips on how to use equity in your home
You can either refinance your existing mortgage, access cash through redraw, or borrow against your equity.
Think about the risks
Whether you’re about to buy an investment property or consolidate debts - there are some potential risks with accessing equity. It’s important to consider the value of your home, your credit history, and your ability to meet your repayments before you borrow against your home. Also consider any discharge or exit fees if you’re moving lenders.
How much equity can I use?
In some instances, we allow for borrowers to cash out up to 90% of LVR, while other lenders commonly set the limit at 80% LVR.
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