If you’re a homeowner on the Gold Coast, your home equity could be one of your most valuable financial tools – especially if you know how to use it wisely. According to CoreLogic, property prices on the Gold Coast increased by 73% between 2020 and 2024. This has resulted in a boom of equity for homes across the region, opening the door to a range of possibilities.
Looking for a Finance Broker?
What is Home Equity?
Equity is the difference between your mortgage balance and your property value. In other words, it’s the portion of your property that you actually own. Over time, as you make regular repayments, the balance of your loan decreases. During the same time (hopefully!), your property value will increase. This is called building equity.
Home Equity Calculator
How can you calculate the equity on homes you own? You can use a home equity calculator, but the equation is simple – just subtract your loan balance from your property’s current value. For example, if your home is worth $800,000 and you owe $400,000, you have $400,000 in equity.
However, banks typically only let you access up to 80% of your property’s value, minus what you still owe (known as ‘usable equity’). In this case, 80% of $800,000 is $640,000. After subtracting your loan balance of $400,000, you’d have $240,000 in usable equity.
If you have usable equity available, you can use it in a variety of ways.
Reasons for Accessing Your Home Equity
If you’ve built up equity in your home, you’re sitting on a powerful financial tool. From funding renovations to investing in property or consolidating debt, there are several strategic ways to put your equity to work. Let’s explore five smart options that can help you get more from your home ownership.
1. Use a Home Equity Loan for Renovations
An equity loan could help you fund those long-awaited renovations. Whether it’s an extension, a new swimming pool or a complete refurbishment from top to bottom, borrowing against your equity could help you increase your property value.
2. Invest in Another Property with a Loan on Home Equity
An equity loan is a popular choice for homeowners looking to finance an investment property purchase. Rather than saving a 20% cash deposit, you can use your equity instead. This is a smart way to build long-term wealth through debt recycling.
3. Use the Equity in Your Home to Consolidate Debt
High-interest debts can be draining on a family’s finances. If you’re trying to service multiple credit cards, personal loans or other debts, then using equity to consolidate your debts could help you get back on your feet. However, it’s important to remember that this may extend your debt over a longer period, which can result in you paying more interest over the life of the loan.
4. Fund Major Life Expenses with Equity
If you’re facing a major life expense, such as a wedding, a new car or higher education costs, you may be wondering how you’re going to pay for them. Accessing equity can often be a lower-cost option compared to alternatives like car finance or personal loans.
5. Use Equity on Homes You Already Own for Future Planning
For many homeowners, equity can play a valuable role in retirement planning. By building up equity now, you’ll have a financial safety net to fall back on during retirement. This could involve taking out a home equity loan or downsizing to a smaller property to boost savings. Each option has different impacts on pension eligibility and long-term finances, so it’s worth seeking professional advice.
A Reminder When Using Home Equity: Work Smarter, Not Harder
A loan on home equity can help you achieve your financial goals faster. If you’ve built up sufficient equity in your current property, you could use it to renovate your home, purchase an investment property or consolidate debt. But to ensure your money is working smarter, not harder, you’ll need expert advice. For the best results, talk to an experienced mortgage broker.
Wondering How to Use Your Equity? Talk to PLS
Every homeowner’s situation is unique, and finding the best way to access equity can be challenging. Fortunately, this isn’t something you have to work out on your own. At Professional Lending Solutions, our brokers can calculate your usable equity and offer expert advice on how best to use it.
Wondering how to make the most of your equity? Talk to the team at Professional Lending Solutions today to find the right strategy for your goals.
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.