Are you curious about using your equity to invest?
What is equity?
Home equity put simply is the difference between the current market value and any loans (debt) held against it. It is the amount of your home that you own outright and the amount that you can potentially use to invest.
What can I do with it?
Remember that you need to be able to afford to pay it back, so the bank will asses you based on your home value, income and expenses. While you may have a lot of equity, you may not have access to all of it at once.
- Use it as a deposit on an investment property
- Pay for a renovation
- Invest in shares
- Buy a car or go on a holiday
Buying an investment property is generally a good investment when you do your research and look for a property that can expect good returns and growth over time. You can include the expected rental to help you to service the loan and over time you will gain equity in that property. This new equity can be used to buy more investment properties.
Calculating your equity
Let’s say your home is valued at $1million and you owe $500,000. You have an equity of $500,000. Banks will generally lend you up to 80% of the value of your home so you have the potential to access $800,000 less what you already owe which leaves you $300,000. It is this $300,000 you can use towards a new investment. Remember that you do need to show that you can afford the new amount – If you are buying an investment property you will have rent to help you with the affordability calculations.
Once you have your approval to buy you can start looking for your investment. Speak to Nicola @ Select Conveyancing for all your conveyancing needs.
Always make sure to gain independent advice based on your circumstances to ensure you feel comfortable with the investment that you are making.