Unlocking the equity in your home can open the door to powerful wealth-building strategies, from creating dual-income properties to funding home renovations. With the right advice and strategy, your equity becomes a flexible tool that can help move confidently toward your financial goals.
One benefit of home owning in a growth environment is that the chances are very high that you’ve built up a healthy amount of equity. That’s great news – especially if you’re looking to build your long-term wealth.
Homeowners who are able to unlock the value in their property without having to sell it, can then access cash which you can use to fund your next move. While many people use their equity for renovations or improvements – which is a great strategy because it adds value to your home – more and more are using that equity to build wealth through opportunities like dual-income living or making improvements on your home.
And that’s where the real growth is happening.
If you want to access the equity in your home, the first step is to understand what you actually have in the current market. Online valuation calculators can give you a rough idea and are a great place to start.
Once you have a good estimate of the value of your home, subtract the remaining balance on your mortgage, and the result is your home equity.
Most lenders will allow you to borrow up to 80% of your property’s value, so if you have a home value of $2,000,000, and a mortgage owing of $1,000,000 then your total equity would be $1,000,000. That means that you’ll likely be able to access around $600,000 for wealth building (subject to income, lending profile and lender policy of course).
The next step is to access your equity. The most popular ways to do this are through:
Now that you’ve accessed your home equity, there are several different ways that you can use this to build your future wealth.
One of our favourite wealth building options is to through dual-income properties. And there’s a reason that this is also one of the fastest growing trends for wealth building.
First, a dual income home gives you two income streams, and typically outperform standard investments on cashflow and higher rental yields. That means you get a smoother, more predictable return. Secondary dwellings are also in especially high demand due to affordability pressures, the tight rental markets nationwide and the drive toward multigenerational living.
If you’re interested in building wealth through a dual-income property, there are a couple of ways to do this. You can build a second living space on your property, or you can buy a purpose built dual-income property.
If you have the right space, the right zoning and suitable access, you can use equity to construct a second living space. This might be a self-contained granny flat, a secondary dwelling, a mini duplex, adding another room to rent or even renovating your home with a dual-key setup, where you have two separate entrances to different parts of the home.
These kinds of options are ideal if you have a large suburban block or underutilised garden space. And they also mean that you can create a dual income with a lot less expense.
Of course, it’s also important to ensure that you’re in an area that has a strong rental demand. Luckily, most parts of Brisbane and SE Queensland fall squarely in this category.
If building a second dwelling or renovating your home for dual access feels overwhelming or having another person or family living closely feels too intimate, many investors instead use their equity to purchase a purpose-built, dual-income property. Typically these are duplexes, but there are also quite a few dual-key homes coming onto the market as more and more homeowners take up this option.
The benefit of a purpose-built property is that it offers immediate rental return, and you’re also able to bypass the time and stress of approvals and construction.
Renovating or improving your existing home has long been the gold standard for building wealth. When done strategically, these improvements can increase your property’s value making it more profitable when you sell it in the future.
It’s important to make the right kind of improvements, however, to be sure that you’re making the most appealing home for potential buyers in your area. In some places this might be putting in a pool, in others it might be focusing on energy-efficient improvements like insulation.
Get an expert involved who can help you make these decisions.
It’s always a good idea to focus on paying off high-interest debts when you’re looking to build wealth. And in some cases – but not all – it can be a good decision to use your home equity to pay these off. When done right this can save you money and improve your financial health in the long run.
However, this is a place to be very careful. If you have a 30-year mortgage, and you consolidate a high-interest debt into it, you may save on the interest rate percentage that you’re paying per month. However, over the life of the loan you may (and probably will) end up paying more interest overall simply because the length of the loan is so much longer.
It’s important to speak to our team as we can help you make the most financially savvy decision.
Of course, these aren’t the only ways to use your home equity to build wealth. You can also invest in the share market, or purchase other types of assets, such as commercial properties.
Whatever you decide to do, it’s important you speak to your financial support team to get the best results. This is your mortgage broker – and we’re always here to help – your tax advisor and your financial planner. This team can help you assess your personal financial situation, equity available and potential tax implications before you make any decisions on how to proceed.
We’re here to help you make confident and strategic decisions about how to use your home equity to build your wealth by looking at your specific situation and goals and helping you work towards them.
Luckily, your home equity is often more powerful than you think, and with the right strategy, can be the catalyst to help you get where you want to be.
If you’re curious about how much equity you access, or want to start the process, get in touch with our team. We’re ready to help.
Ready to take the first step? Contact our team today!
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