Untapping Your Equity To Invest

As your home grows in value and you pay off your mortgage, you are continually increasing the equity you own in your home, and with this comes increasing opportunities.

Beyond the security that comes with owning our own home, equity is the reason we fight so hard to get into the property market.

So what is equity?

If you take the current market value of your home and subtract the amount you still owe the bank, this is your equity.

As you make repayments and reduce your debt, your equity increases. The other driver is capital growth โ€“ as your home naturally increases in value in line with market forces, that gap between market value and your current home loan grows bigger.

For example,ย a house bought in Mitchamย in 2014 for $760,000 is now worth $1,000,000 on average.

The equity in the property is, therefore, $240,000. This is clearly a large sum that would open up many opportunities for those looking to invest.

How can I use equity to invest?

Once your equity has developed, you can use it as proof of your financial security and apply for an additional loan. While many people use this opportunity to renovate or spend the money elsewhere, often on a holiday, a smarter choice can be to reinvest in the property market.

You can help to secure your financial future by essentially using your equity asย a deposit on an investment property. This is a unique opportunity and one that continually pays off in the long term for Australian investors.

How much can I borrow?

Itโ€™s not recommended to use all of your equity to secure a new loan, and risk-averse banks wonโ€™t let you. Typically, banks will assess up to 80% of your equity as โ€˜usableโ€™.

As a general rule, the banks will then loan you enough to purchase a property worth up to four times your usable equity. In our example above, that would be up to $960,000.

Key tips when investing

Make sure you can afford the repayments.

  • Servicing two mortgages will clearly require more complicated financial management. Ideally, your new rental income will cover at least the interest repayments for your investment property, but at times you may find yourself needing to pay more, especially in the beginning.

Get sound financial advice

  • There are many financial and tax implications when buying an investment property, and a whole world of possible tax deductions will open up but youโ€™ll need to make some smart decisions. Getting the right advice early before making any commitments is essential.

Buy your investment property in a high growth area

  • It is important to purchase your investment property in an area with high demand, even if itโ€™s not somewhere you would choose to live. High demand means you can hopefully see immediate financial returns through rental income. It also means youโ€™ll start to see equity building in your investment property as well.

Choosing the right suburb is where we Noel Jones can help.ย We know these parts of Melbourne extremely well, and can help you find a great property with high rental yield and strong growth opportunities.

Weโ€™ll start with finding the current market value of your house and work with you from there. If youโ€™re ready to find out more about the equity in your home and what you can do with it,ย get in touch with your local Noel Jones office today.

Share:

More Posts

Meet Our January CSP Grant Winner

Meet Our January CSP Grant Winner Congratulations to our January CSP Grant Recipient – NYP Dragons Water Polo Club. NYP Dragons Water Polo Club is a key part of the water polo community in Melbourne, competing in both weekly leagues and invitational tournaments across Victoria. Based at Aqualink Nunawading Pool, they are committed to the continued development and growth of

Celebrating Noel Jones Real Estate’s Triumphs in 2024

Celebrating Noel Jones Real Estateโ€™s Triumphs in 2024 Looking back on 2024, Noel Jones Real Estate has much to celebrate, with a year marked by outstanding achievements and well-deserved recognition across the industry. From prestigious awards to key finalist nominations, the agency has proven its leadership, dedication, and excellence in the real estate sector. The hard work and commitment of

Pet-Friendly Homes: Designing for Furry Friends

Pet-Friendly Homes: Designing for Furry Friends When Selling Your Property As a pet owner, your furry friends are more than just animals โ€” theyโ€™re cherished members of the family. When preparing to sell your home, you might not think of your pets as a selling point, but in todayโ€™s market, pet-friendly homes are in high demand. More and more buyers

How to Spot a Hidden Gem: Finding Undervalued Properties

How to Spot a Hidden Gem: Finding Undervalued Properties In the world of real estate, there’s always the potential to discover a hidden gem โ€” a property that, despite not being in pristine condition or looking perfect on the surface, holds enormous potential. These undervalued properties can offer incredible returns, whether you’re looking for a personal home with room to

Send Us A Message

Good Job!

Thanks for taking the time to let me know about your needs.

I look forward to helping you find your new home.โ€‹

Buyer Requirements

Thank you!

Iโ€™ll be in touch soon with information on the suburb youโ€™re buying in.

Find Out More