Home Equity Release Guide

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If you own your home, you may have access to a source of income that you are probably not aware of – equity. In this aticle  we will cover the basics of having equity built up in your home so you can make an informed decision about whether equity release may be  right for you.

What is Equity Release?

Equity is essentially the value of your house. If you own your home outright, you possess 100 percent of the equity and therefore 100 percent of the cash value of the property. If you have a mortgage, then the percent of equity you own will equate to how much of your mortgage you have repaid.

Equity release is a mortgage feature which allows homeowners to extract money from the value of their home while still being able to live there. You don’t have to repay equity until you sell your home or when settlement of your estate is completed (when you pass away). In the meantime, you’ll have to pay interest on equity withdrawn.

Why release equity in your home?

Maintenance or renovations on your home – There is no point owning your home outright if it is falling apart around you. Renovations can be costly and you might need a lump sum in order to maintain your home’s livability.

As a deposit for your next home or an investment property – If you are looking at buying a new house that is more suitable for your golden years or as an investment property, you may need significant capital in order to put down a deposit.

Investing in other wealth-building opportunities – If you use your equity to wisely invest in shares or managed funds, you  may be able to create a source of income that could benefit you in your retirement.

Large purchases – “You can’t take it with you”—you should be able to enjoy the wealth you have accumulated over the course of your working life.  Equity can be used for large purchases, such as a car or a dream holiday.

Medical bills – As many people get older, more and more things go wrong with their bodies. Medical bills can be astronomically high. You may need to access your equity to pay for large expenses such as surgery bills. 

Debt Consolidation – You may be able to utilise the equity in your home to consolidate other higher interest debts into one easy and affordable monthly mortgage repayment.

How to build home equity?

There are a variety of options available for homeowners wishing to quickly build equity in their home. A few common opportunities are:

  • Making additional payments
  • If you have cash saved up, you may be able to refinance your mortgage to shorten your loan term and lower repayments.
  • If you plan on buying a home, it is good to make the largest possible down payment.
  • Keeping an eye on the status of the current property market to watch for any increases to the value of your property.
  • Making home improvements to help increase the value of your home.
  • Pay off home equity loans as soon as possible.

Conclusion

All in all releasing home equity can be beneficial to home owners, however it is important to fully understand what you are doing and seek expert advice. For assistance regarding home equity release, contact our team of mortgage brokers and financial planners who can  help you to make the  most suitable financial decisions.