11 Oct 2017

How to Make Your Home Equity Work For You

Home Equity

Let’s start by understanding what home equity is.

When you move into your home and start paying off your mortgage, over time, two things happen – you’re reducing your home loan balance AND property values continue to go up.

Home equity is calculated as the difference between what your home is valued at on the current market, and how much money you still owe on it. For example, if your home is worth $500,000 and your mortgage is $250,000, you have equity of $250,000.

There are a few ways you can access this equity and make it work for you. We cover some main points below:

Refinance to access equity

Refinancing your home loan to a better interest rate or terms could save you thousands of dollars of mortgage repayments over the life of your loan. The more equity you’ve built up in your home, the better the interest rate you could get when refinancing.

Refinancing is also a means of tapping into the equity in your home to use to buy a second property, renovate your existing home or buy a new car while paying the same low interest rate as your home loan. For more information about refinancing you can also download the Mortgage House Guide to Refinancing.

Renovate to add value to your home

Renovating key rooms in your home like kitchen and bathrooms, adding more recreational space like an outdoor entertaining area or extra room could all add value to your home and in turn increase your equity. Read our blog about the best room to renovate for profit.

How much value will it add to your overall property value can be hard to predict. You can always check with your local real estate agent for advice.

Cannot finance major renovations – start small. Painting the interior or exterior of your house and landscaping can help add value for a relatively low cost. When considering home renovations, it’s important that you do your research to ensure that you don’t improve a property beyond its resale value. You may end up spending too much money on renovations and don’t get any incremental profit if you decide to sell.

Consider an investment property, or two

If you love the area and home you live in, you could use the equity in your current home as a deposit for an investment property. This could gradually set you up financially. Buying an investment property in the right area, close to amenities, could prove to be a source of regular rental income and potential capital growth on your investment.

The more equity you have, the bigger your deposit, and the easier it should be to secure a second loan. As you grow the equity in your investment property don’t forget, the equity in your current property continues to grow as well. Over time, you could build up a property investment portfolio – all starting with the equity in your home.

Get in touch with 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.

Want to find out more about using the equity in your home to refinance? 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!


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