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Accessing this equity may assist you with making another purchase.
But what is equity and what kind of purchases can it help fund? To help answer those questions and more, we’ve put together this handy guide to how it all works.
Put simply, equity is the difference between the value of the property and what you owe the lender. If you’ve paid off a considerable chunk of your home loan or your house has increased in value since you purchased it, you could be sitting on a reasonable amount of equity.
If you decide to refinance your home loan, your current lender, a new lender or mortgage broker will be able to calculate your usable equity, which is the amount of equity they will allow you to access.
Equity can be accessed for lifestyle improvements, such as the purchase of a car, travel, home renovations, an investment property and more. However, make sure you consider any tax implications once you redraw it.
There are many potential benefits to refinancing your home loan to access equity, including:
Despite these benefits, refinancing home loans to access equity isn’t for everyone.
Before you decide to go ahead, make sure you take the time to consider any possible drawbacks, including:
A qualified mortgage broker can help you work out whether refinancing your home loan to make a big purchase is appropriate for your financial situation.
In the meantime, finding ways to pay off your home loan faster will help you continue to build the equity in your home, and increase your ability to achieve multiple financial goals at once.