Understanding Equity: Your Key to Financial Opportunities
.jpg)
Equity, in lending terms, is the net value of your property after taking out existing mortgage balances.
Bearing in mind that lenders adopt a loan to valuation ratio (LVR) of 80% of your property value (90% if you want to pay mortgage insurance or meet certain professional employment criteria), the equity value that a lender applies is scaled back to reflect that 80% LVR.
Take a home worth $750,000 with a mortgage of $350,000 – you have $400,000 in equity built up. Adopting the 80% LVR rule from a lender perspective your usable equity is:
$750,000 x 80% = $600,000, subtract $250,0000 = $250,000.
This equity then allows you to:
- Leverage the value of your property to buy additional investment properties (commercial or residential)
- Complete renovations; add a pool; add a granny flat
- Draw on cash to invest in shares or managed funds
- Help a family member by providing a guarantee to help them purchase a home
When its used to build your wealth, equity can be a very powerful tool.
If you would like an idea of what your equity is and what it means for you in terms of growing your wealth, contact Katrina at Central Coast Mortgages to book an appointment today.
CONTACT US TODAY
We are based on the beautiful Central Coast, between Sydney & Newcastle and we offer a complimentary home loan broking service.
Make an appointment today for an obligation-free chat, to talk about what you need and how we can help.
This article is general in nature and does not constitute financial or credit advice. Individual eligibility for any loan product depends on your personal financial situation and the lending policies of individual lenders, which can change. Your complete financial situation will need to be assessed before acceptance of any proposal or product. Katrina Russell is an Authorised Credit Representative 542497 of Outsource Finance Pty Ltd, Australian Credit Licence 384324.
This is an editorial post and is not paid advertising content.
