How Equity Works

How Equity Works

How Equity Works

Equity is the difference between the home loan you have and the current property value. The larger your equity, the great investment opportunities you will have.

Creating your equity is a vital part of any financial strategy if you're looking to grow an investment property portfolio, invest in the equity markets or invest in other areas.

Equity can form a key part of your risk management plan to ensure that you can hold your property or share portfolio until it grows in value over time.

History has shown if you don't have to sell property, share or other investments like managed funds when markets are at a low then you will continue to rise above the falls andgrow your portfolio.

Equity has the power of liquid cash that you can raise to use as your deposit structure towards purchasing further investments like property.

In relation to buying property, the equity in your home can be used for the deposit and expenses.

When equity is established, a loan facility is raised on your property usually at a maximum of 80 per cent of the current value. Interest is only charged when you actually draw down on the account and only charged on the draw-down amount.

Unfortunately lenders are pulling back from these type of home loan products so it is vital to organize these before they might pull out of the market altogether.

Once these loans are established they are generally available for the next 25 years.

Once your equity loan is in place you can take your time to search for the appropriate investment property and or other investment options.

Once your deposit structure is in place, all other property loans will be established on the investment properties on a standalone basis utilizing various lending institutions.

This improves your risk to debt ratio in relation to protecting the family home.

To find out more about the above structure and to take the first step, you need to determine your current equity position and borrowing capacity. This can be done by studying your financial data and books or alternatively by contacting your bank rep or a reputable mortgage broker.

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