There’s a stigma that comes with buying a house. It makes you feel like you’re “settling down”. It’s when the responsibility of being a grown up kicks in, alongside the dreaded mortgage repayments. However, your home could actually be the key to unlocking the potential in your life – whether it’s renovating your home, paying for your kids’ education or upgrading to a new car.
We’ve talked about accessing equity in your home and how you could build it through renovating, now it’s time for the fun part: how you could spend it.
When to use equity
The easy access and fixed interest rates available through equity may be enticing and create a temptation to borrow regularly. But equity isn’t for everyone and it’s not a solution for every situation. Using the equity in your home means the total amount you owe on your home loan will increase, which will likely result in higher monthly repayments. That means you should think carefully about whether equity is the best way to pay for whatever home improvements or life upgrades you have in mind.
The home equity piñata
We know life doesn’t stop when you get a mortgage. Your bucket list is long and it comes with a price tag. You might be considering talking to a lender about accessing your equity. But if you’re a first timer, you’re probably unsure about how far to take it. In that case, imagine your home as a piñata and the equity as the value (or candy) inside. You’re up to bat, and there’s a few different ways you could approach it…
Level #1: Playing it safe (None)
You’ve got your eye on the target, but you haven’t busted it open. You’d prefer to keep growing the value inside your home for now. You’re interested in what’s inside the piñata and you get your home valued regularly to weigh up your options for the future. You’re starting to make more regular mortgage repayments to reduce your loan balance and increase your equity.
Level #2: Party = Started ($1,000-$20,000)
You’ve broken open the equity piñata just a little bit; enough to upgrade to a family sized car. You’re cautious, but you recognise equity could be a cost effective solution to help you achieve those smaller, but very important, life goals.
Level #3: Solid Hit ($25,000-$200,000)
You’re taking a big swing at the piñata and have a clear view of what you want to achieve with the money. You have a decent amount of equity that you could use for the pie-in-the-sky things on your bucket list. Renovating the house may be the main reason for a serious withdrawal like this, which could add further value to your home in the long run. This level of investment is generally a one off, so speak to your lender to decide if it’s right for you.
If you’d like to chat with us about how to access the equity in your home to help achieve your goals, you can call us on 133 464 or fill out this form .
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