As a homeowner, your net worth may have increased substantially in the past year due to rising property values. This unexpected surge can open up a variety of exciting possibilities. Home markets often defy logic, withstanding pressure from rising interest rates and strained living expenses, yet still managing to maintain steady growth in property prices nationwide. Keep reading to know how availing a quick home loan will help maximize your home equity potential.
This article states that since January 2023, national home values have risen by $71,832, reflecting an incredible 10.2% jump in a little over twelve months or an increase averaging $5,130 per month.
For instance, consider that the average monthly disposable earnings for full-time Australian employees were $6,565 last financial year.
However, the benefits of higher property values extend beyond mere satisfaction. They present homeowners with opportunities to further enhance their financial standing without resorting to selling their homes.
Let’s delve into this further.
Unlocking Wealth through Home Equity
The house may be rising in value, but that won’t result in increased home equity unless your mortgage payments don’t go up. Home equity is the difference between your home’s market value and your remaining mortgage balance. For example, if your home is worth $1,000,000 and you owe $500,000 on your mortgage, that would give you $500,000 in home equity. The best part about home equity is its potential as a valuable financial asset.
Maximize the Potential of Home Equity
Many financial institutions are now offering the chance to utilize home equity in different ways, such as security for extra borrowing or refinancing current loans with no risk to homeownership. Here are three ways you can empower your increased home equity:
1. Refinance for Lower Interest Rates
Most likely, your mortgage will translate to a considerable percentage of your monthly family spending. Take the chance with a relatively cheaper, more competitive interest rate or more flexible product with added perks, such as an offset account, to save heaps of money.
2. Use Home Equity for Real Estate Investments
Using your augmented home equity to become a landlord can be a better alternative to relying solely on cash savings while still making your investment. A sound investment can provide income-generating returns for the long haul, tax savings, and may even appreciate in value, leaving a mark to secure your legacy or retirement.
3. Renovate Properties with the Help of Home Equity
Having to spend in cash when dealing with renovation of your property can be quite hard when funds are at a premium. In such cases, even when there is no visible growth in the real estate market, it is always beneficial to apply for a loan using your house equity to do renovations.
Unlock Equity: A Simple Process
It might seem hard, but accessing equity is simple. For example, if three years ago you bought your home at $800,000, and its value has now swelled to $1 million with an outstanding mortgage balance reduced from $600,000 to $500,000, then refinancing the property to a $700,000 loan (70% of the property’s market value) can help you unlock $200,000 in equity for renovations or property investment. Banks also usually allow borrowing up to 80% of a property’s value, potentially unlocking more equity for further financial endeavors. For more detail about growing your home equity and potentially building more wealth, please contact us 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.
