If you’re interested in renovating your home, doing some necessary maintenance or even investing in a brand new property but don’t have the extra cash at the moment, there may be a solution you hadn’t considered. You can actually use the equity your property has accumulated to get the ball rolling on new projects. Each bank and lender have different requirements and processes for using equity so make sure to double check with your mortgage broker first before making any decisions.
Technically speaking equity is the difference between the market value of your home and what you’ve already paid off. So in order to use the equity against your loan, you will need to get a property valuation. This is really just to find out how much your property is worth (which is always good to know) and whether or not the amount you’ve already made in repayments is large enough to use for another purpose. If you think your property may have increased in value and you’ve been making repayments for a while, you may be able to tap into some of these funds.
Once you’ve decided on what you want to use your equity towards, you can either top up your home loan or withdraw extra repayments. Both ways are relatively straight forward and you can discuss your options with your broker. Just remember that if you add a substantial amount to your loan it will either mean higher repayment prices or a longer period of repayments. So if you’re looking to put a deposit down on a new home, it’s probably best to top up your loan whereas if you are only looking for a smaller payment to use towards necessary renovations and maintenance perhaps withdrawing extra repayments would be a better option for you.
Always keep in mind these things do take time and preparation is needed. Allow a few weeks for the lender to approve the use of your equity and to organise a property valuation. So, if you’re looking for quick cash, using the equity on your home loan isn’t for you. Having regular property valuations and renovating your property is a sure fire way to guarantee success in the long run. Remember to always ask your mortgage broker every question you have on your mind and make the right decision for you.