Renovate or invest? How 7-in-10 Aussies are using their home equity
Seven in 10 homeowners have recently used the equity in their home to renovate, invest in property or shares, or boost their superannuation. Have you thought about how you could take advantage of last year’s property price spike?
You might have heard that property prices spiked 23.7% in 2021, yeah?
That’s quite the growth spurt!
So how do you take advantage of that growth without (or before) selling your home?
Well, one way to do so is to cash out equity while property prices are high (which we’ll explain in a little more detail below).
According to NAB research, three in 10 mortgage holders have recently done just that and have used the money to give their home a facelift by renovating.
Other popular options include using unlocked equity to buy an investment property (16% of homeowners), invest in shares (12%) and boost super balances (8%).
So how does ‘cashing out equity’ work?
It might sound complicated – but we promise it’s not.
Let’s say you bought an $800,000 house three years ago that, due to last year’s property price surge, is now worth $1 million.
And let’s also say you took out a $600,000 loan for that house, which you’ve managed to pay down to $500,000 (you little beauty!).
By refinancing that $500,000 loan into a $700,000 loan (70% of your property’s new market value), you can unlock $200,000 in equity to help fund a deposit for your renovations or to buy an investment property.
It’s also worth noting that banks will typically let you borrow up to 80% of a property’s market value.
So if you upped the ante and refinanced to an $800,000 loan, you’d be able to unlock $300,000 in equity.
Want to find out more about unlocking the equity in your home?
If it still all sounds a little confusing, don’t stress, we’d be more than happy to sit down with you and help you work out how much equity you can unlock.
And if you decide to proceed, the good news is part of the process can include refinancing your home loan.
Why’s that good news?
Well, just because interest rates are going up, doesn’t mean you can’t scope out a better deal on your mortgage. Competition amongst lenders remains fierce, particularly if you have a decent amount of equity and a strong track record of meeting your mortgage repayments.
So if you’d like to explore your options when it comes to unlocking the equity potential in your home, get in touch today – we’d love to help you crunch the numbers.
Want to learn more? Talk to our brokers today!
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
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