Put simply, equity is the difference between what you owe on your property and what it’s worth. It’s the portion of your home you actually own outright, and it can be a powerful financial tool when used wisely.
One thing worth knowing is that different banks will value your property differently, and they’ll also offer different interest rates depending on what you’re using the funds for. This is where working with an experienced Home Equity Loans broker can really help you navigate your options and find the right fit for your situation.
Using Equity for Renovations
If you’re planning to use your equity to renovate your home, the process is usually fairly straightforward. Typically, we’d look at your existing home loan and do what’s called a “top up” – essentially increasing your current loan to give you access to the additional funds you need.
That money would then be available in your redraw or offset account, depending on how your loan is structured. It’s a neat way to fund improvements to your property without setting up an entirely separate loan.
Using Equity to Invest
If you’re looking to use your equity for investment purposes – say, putting $200,000 into shares or managed funds – the approach is a bit different. Generally, we’d set this up as a separate facility from your home loan, and there’s a good reason for that.
When you borrow money for investment purposes, you may be able to claim the interest as a tax deduction because you’ve borrowed for an income-producing purpose. This is what’s often referred to as negative gearing. By keeping the investment loan separate from your home loan, it makes the tax side of things much cleaner and easier to manage.
Of course, the idea is that your investments will grow in value over time. But as with any financial decision, it’s important to get the right advice and make sure the structure works for your individual circumstances.
If you’d like to explore what options might be available to you, we’re always here to have a chat and help you understand what’s possible.
