If you’ve owned your humble abode for a number of years there’s a good chance that you’ve built up some reasonable equity – a super valuable asset that can come in handy with future property investments. However, before diving head first and making an investment in property to grow your portfolio it is important to understand exactly what ‘equity’ is and how you can use it to your advantage.
What is equity?
Equity is the difference between the value of your home and how much mortgage you still have to pay off. The marvellous thing about it is that it can be leveraged to create great wealth once you have accumulated enough of it. By tapping into it wisely, you can increase your borrowing capacity, your overall purchase budget and even facilitate property investments to ultimately set you up for a long and prosperous retirement. Buying a second piece of real estate with your equity could be one of the best decisions of your life, so how on earth can you access it to achieve your property investment goals? We tell you in just four simple steps…
1. Speak with a good mortgage broker to secure the best investment loan
First off, be on the lookout for a good mortgage broker that you can trust to secure you with the best investment loan possible. Around this time, your broker can help you get in touch with a professional prospective lender who will send out a valuer to your property to determine its market value. The most effective way to get the most out of your homes valuation is to keep it well maintained through renovations to improve its aesthetics – a facelift will promise the big bucks.
2. Get the all clear from the bank to receive your equity
Once a valuer has inspected your home and has come to a conclusion on its current worth your broker can help you calculate your equity. Once calculated, this figure can be taken to the bank where the value of your next loan will be determined. If they are comfortable with your property and financial records and you comply to all their yes’ and no’s they will typically release up to 80% of your calculated equity to put towards a deposit on your next loan.
3. Work with your broker to settle on the best loan and structure
Have a chat with your broker to determine the best loan and structure to suit your budget and usable equity. This step is extra important to ensure that you are not wasting your equity and that no investment hiccups will arise. A good broker can alleviate any stresses and give you the confidence that you’ve made the right property investment decisions.
4. The house hunting begins!
And now the fun begins! From here on in, you can be on the search for a solid property that you can acquire through the use of your well-deserved equity. Hip-hip hooray! Keep your eyes peeled for a property that will promise you wealth creation and a rich and prosperous retirement.