Your home is one of the biggest assets you will ever own. When property values goes up, so does the equity in your home. When this happens you can potential borr
ow against the equity for a wide range of purposes. These may include:
Renovating your home
Going on a holiday
Purchasing a new car
Buying an investment property
Life changes, such as having a baby, kids’ education fees, health bills
How to Calculate The Equity In Your Property
Equity is the value of your property LESS your current mortgage balance. Let’s say your house is worth $500,000 and your current loan balance is $300,000. The equity in your house is therefore $200,000.
However when borrowing against equity, lenders will always require some to remain in reserve. Most lenders will allow you to borrow against 80% of the property value OR 90% with lenders mortgage insurance. So based on the above your accessible equity would be:
90% of $500,000 = $150,000 (total loan of $450,000 less current mortgage of $300,000)
80% of $500,000 = $100,000 (total loan of $400,000 less current mortgage of $300,000)
How Do I Access My Equity?
One way to access the equity in your home is to restructure or refinance your current loan and attach a line of credit to your current mortgage. Line of Credit facility to your home loan. A line of credit is a separate facility attached to your home that allows you to draw on the funds as needed. This can be very handy when you are completing major works as you only make repayments on what has been drawn down as required.
To find out how to access the equity in your home contact us today.