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 spike in the property market?
You might have heard that property prices spiked 23.7% in 2021.
Remember that? It was 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).
Expand Your Knowledge: As you’re diving into the real estate world, our specialized guide on buying a house with equity can provide invaluable insights that dovetail with your current research.
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%)
- boost super balances (8%)
So how does ‘cashing out equity’ work?
The term might sound tricky but the practice is actually pretty simple.
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.
Related articles:
- Cash Flow Vs Equity: a 4-Step Guide to Your Next Investment
- How Does Equity Work When Buying a Second Home?
- How to Refinance a Home Loan: A Step-by-Step Guide
Want to find out more about unlocking the equity in your home?
If you’re getting confused, don’t worry, we’d love to sit down with you and help you work out how much equity you can unlock.
And if you decide to move forward, 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 will still remain strong, 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 with Soho Home Loans today – we’d love to help you crunch the numbers.
Need more financial advice?
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