If you understand investing, you’ve probably gathered that you want to buy low and sell high. Property is no different.
Realestate.com.au has you covered if you’re a Sydneysider (or if you live anywhere else in Australia, for that matter). At any given time, you can see which areas are growing the fastest in terms of property value. Just click this link to head to Realestate.com.au’s investment section.
While it’s not wrong to say that you should be investing in property in fast-growing suburbs, it’s also important to understand how equity works and how to take advantage of it. If you own property in Melbourne or Sydney, you might have wondered how to take advantage of recent property value increases.
If you want to access your current equity in a property, you can either sell it or take out another loan. If there aren’t any good reasons to sell, you should seriously consider continuing to take advantage of rising property values by exploring the latter option.
Leveraging your equity on another deposit
Equity refers to the amount of a property you’ve paid off. Said another way, it’s the percentage of a property you actually own. For instance, if your property is valued at $1,000,000 and your mortgage is $500,000, you have half a million in equity.
But you can’t access the full half million. Banks will only lend a portion of the property value 80% in many cases.
So in the above example, you’d only be able to access $300,000. That’s because you’d be taking the mortgage from 80% of the total value, not the full million, to find your equity.
Provided you have the income to support it, you could use this amount to make a deposit on another property. By doing this, you build your portfolio, adding more income-producing assets to it.
Equity dos and don’ts
Banks will want to arrange a valuation on your property before you leverage your equity. You want to ensure that your property is presentable and well-prepared. It might serve you to speak to a real estate agent about this.
It also pays to do your research. Figure out what documentation you need and have it prepared beforehand. This can go a long way in speeding up the process.
And lastly, don’t go too crazy with your equity. It can be a strong financial strategy to leverage equity to make more deposits and build your property empire, but there are risks involved. You never want to have too much of your money on the line.
Mortgage House
At Mortgage House, we’re no strangers to the homeowner’s journey. It’s a long (but rewarding) one.
But don’t worry, we can help with that.
If you’re thinking of leveraging equity and making a deposit on a new investment property, you can contact us for advice about the best options for you when it comes to your mortgage. The cost of your mortgage can drastically affect your financial planning, so it pays to speak to the experts about it.
Click here to speak to us!
