Astute East Brisbane's Finance Insights

Drawing on his industry experience, Tony Duncan shares his thoughts on industry changes, home loan requirements and a number of important areas to consider when planning your first home purchase or your next property investment. 

  • Tony Duncan

How to use the Equity in your home

Updated: 1 day ago

House values have been rising since October last year, posting a 21.6% increase over the 12 months ending October 2021, while rents are 9.2% higher over the same period (Core Logic). If you’re a homeowner considering how you might benefit from this market growth by accessing the equity in your home, we can help.


Within this article we will cover the following questions:


What is equity in your home?

What options are available with the release of equity?

How do I access the equity in my home?

Other ways to increase equity.

And…passing the sleep test.


So what is equity?

Equity refers to value accumulated in your home. It’s calculated simply by the value of your home minus the amount of money owed on it through your mortgage. If you’re looking to determine the equity in your home, it is worthwhile seeking a professional valuation.


How to work out the equity value in your home

What options are available with equity

Equity is a valuable asset to accumulate in your property and can be used for a number of different endeavours. A few that you might be considering include:

  • Renovation of your home – such as a bathroom refresh, a deck or a granny flat?

  • Purchase of a second property - perhaps an investment property to be rented out.

  • An upgrade to a new home as your principal residence.

  • Become ‘Guarantor’ for a relative to purchase.


How to access equity when purchasing another property

If you’re looking to purchase a property using the equity in your home, there will be several factors considered by a lender. These include but are not limited to:

  • Your income

  • Your credit rating

  • Your existing property location

It’s important to consider that lenders don’t usually let you unlock all your equity. As a general rule, you can work towards accessing up to 80% less any outstanding debt. Should you require more than this for the purchase, you might consider paying Lenders Mortgage Insurance (LMI) which can have tax benefits if this is to be an investment property. For more on this, you should speak to an accountant.


Accessing equity example

Other ways of increasing your home equity

If you’re looking to increase the equity in your home there are a few things you might consider putting in place. This includes:

  • Renovating to boost the value of the home by more than what the renovation costs (e.g. adding another bathroom or building a pool)

  • Making larger mortgage repayments

  • Making more regular repayments – fortnightly or weekly

  • Using a home loan offset account to reduce the interest you pay on the loan


The Sleep test

It can be a big leap to unlock equity in your home to purchase another property. It may involve refinancing your existing mortgage and that can have costs associated. It can be a daunting prospect to take on a second mortgage and it’s important to feel comfortable that whatever decision you make, so it’s important to speak to your mortgage broker to understand all the costs involved.


You’ll find we encourage a sleep test. What’s the sleep test you say? Well, it’s important with any prospective decision like buying a property, that you can still sleep comfortably at night. At Astute East Brisbane, this is a really important point for us, and we will do our best to provide you with the most up to date information and talk you through various financial scenarios so that you can get a good night sleep with your decision! We look forward to supporting you to achieve your goals however we can. Reach out today to discuss more.


Make decisions that will help you sleep comfortably

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General Advice Warning: This communication contains general information only and in no way constitutes the provision of professional advice, nor should it be relied on as a substitute for financial, credit, accounting, legal or other professional advice. We have not taken into account your financial situation, investment objectives or particular needs. Before making an investment or financial decision, a person must seek appropriate independent professional advice and also consider whether this information is appropriate to their needs, objectives and circumstances. The author as well as their representatives, agents and employees give no guarantees and make no representations, express or implied, as to the accuracy, currency, completeness or suitability of the information contained in this document. Nor do they accept any liability whatsoever as a result of any information herein being incorrect, incomplete or unsuitable or as a result of a person in any way using or relying on the information herein.


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