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Home equity has become an increasingly popular avenue for homeowners to leverage their property's value, offering them opportunities to invest, purchase second homes, or fund renovations. Understanding how home equity works and the mechanics of home equity loans is crucial for anyone looking to access the equity in their home effectively. This article will guide you through the essential aspects of home equity, how to calculate it, and how home equity loans function, providing a comprehensive view of this financial tool. What is Home Equity and How Much Equity in Your Home Can You Access?Home equity refers to the value of your home minus any outstanding mortgage balance. Essentially, equity is the difference between what your home is worth on the current market and how much you owe on your home loan. For instance, if your home is valued at $400,000 and you owe $250,000 on your existing loan, your home equity would be $150,000.This figure represents the portion of your home's value that you truly own and can borrow against to access cash for various purposes, such as home improvements, debt consolidation, or even purchasing an investment property.Calculating the equity in your home is a straightforward process. First, determine the current market value of your home, which can be assessed through online property valuation tools or a professional appraisal. Once you have established this value, subtract your current home loan balance from it. The formula is simple: Equity = Market Value of Your Home - Loan Balance. For example, if the market value of your home is $500,000 and your existing loan balance is $300,000, your usable equity would be $200,000.Factors That Influence the Amount of Usable EquitySeveral factors can influence the amount of usable equity you can access. One significant factor is the current market conditions, which can affect the value of your property. If property values in your area have risen, you may find that you have much equity available to borrow against.Additionally, the type of loan you have may impact your equity; for instance, a home equity line of credit might allow you to access your equity differently than a traditional home equity loan. Other considerations include the repayment terms of your existing home loan and any additional liens on the property.How Does a Home Equity Loan Work?A home equity loan allows homeowners to borrow against the equity in their property. Essentially, it is a type of loan that uses your home equity as collateral. When you take out a home equity loan, you receive a lump sum amount based on the equity you have accumulated, and you agree to repay this amount over a specified period with a fixed interest rate.The process typically involves applying for the loan, undergoing a credit check, and providing documentation regarding your income and the current market value of your home. This type of loan can be an attractive option for those looking to access a … [Read more...] about Understanding Home Equity and How Home Equity Loans Work

Property investors committed to $11.71 billion of home loans in July 2024, which was the second-highest month on record, according to the Australian Bureau of Statistics.It was also 35.4% higher than in July 2023, showing the enormous growth in investor activity during that time. Here are five reasons why so many Australians consider property investing a great way to build wealth:Capital growth – property prices have increased significantly over the long-termRental income – the income you collect from your tenants can contribute to paying off your mortgageTax benefits – you can potentially reduce your taxable income if your expenses exceed your incomeDiversification – property can balance out any shares you may own through your superannuationFlexibility – once you’ve accumulated enough equity in your investment property, you can use that to fund the deposit on another propertyAs you can see, property investing has a lot of potential benefits. If you want to know more, I’ll be happy to run some numbers for you.Let’s talk property investment Hit the button below to arrange a conversation with one of my loan specialists to find a deal that's best for your situation. Chat to us today We partner with over 50 lenders so you can find the perfect solutionFollow Facebook Linkedin Do you have questions about mortgages or loans?Ask us in the comments below … [Read more...] about Investor borrowing rises 35.4%

One of the great things about constructing your own home is that it can be tailored to your specifications. If you’re interested in building rather than buying your dream home, here’s the process you need to follow:Speak to your broker about your goals, so you can create a finance plan togetherBuy the landDesign your homeFind a reputable builderObtain building permits and approvalsBuild the homeWith a traditional home loan, you receive the money in one lump sum; but with a construction loan, you receive the money in five stages throughout the project. You pay interest-only on the portion of the funds you've received to date, rather than the whole loan; and at the end of the build, your loan reverts to a traditional principal-and-interest mortgage.It’s worth noting that the rate of annual growth in house-building costs increased from 3.9% in September 2023 to 4.3% in June 2024, according to the Australian Bureau of Statistics.Given that costs will likely continue to rise, the sooner you build, the cheaper it could be in the long term. If this is something you’re thinking about doing, you should explore your options soon.Get in touch if you need a construction loan.Hit the button below to arrange a conversation with one of my loan specialists to find a deal that's best for your situation. Chat to us today We partner with over 50 lenders so you can find the perfect solutionFollow Facebook Linkedin Do you have questions about mortgages or loans?Ask us in the comments below … [Read more...] about How to build your dream house

The latest home loans data from the Australian Bureau of Statistics has revealed three key trends.Borrowing is rising strongly. The total value of home loan commitments in June reached $29.19 billion, which was 1.3% higher than the previous month and 19.1% higher than the previous year. Investor activity is incredibly strong right now. While the volume of owner-occupied loans rose 13.2% year-on-year to $18.17 billion, investment loans jumped 30.2% to $11.02 billion. While refinancing activity remains quite high, it's well below the record levels of mid-2023. Borrowers refinanced $15.79 billion of loans in June, which was 20.9% lower than the year before. Contact me if you’re thinking about buying a property. I can get you a home loan pre-approval and, if you’re interested, introduce you to a good buyer’s agent.Need a home loan? Let's chat.Hit the button below to arrange a conversation with one of my loan specialists to find a deal that's best for your situation. Chat to us today We partner with over 50 lenders so you can find the perfect solutionFollow Facebook Linkedin Do you have questions about mortgages or loans?Ask us in the comments below … [Read more...] about Mortgage activity rising, as borrowers commit to $29bn of home loans

When you apply for a mortgage, the lender uses a series of criteria to assess how likely you’d be to repay the loan. As part of this process, the lender also considers whether you’d be able to continue making your repayments if interest rates were to rise.Generally, lenders will apply a buffer of at least 3.00 percentage points – so if you applied for a loan with an interest rate of 6.50%, this would mean calculating whether you’d be able to make repayments at 9.50%.This ‘mortgage serviceability buffer’, as it’s known, is mandated by APRA, Australia’s banking regulator.Partly, it’s designed to prevent lenders from issuing risky loans; because if a large number of borrowers defaulted on their loans, that would undermine the banking system. And, partly, it’s designed to protect borrowers from taking on loans they might not be able to afford.The serviceability buffer can make it harder for borrowers to qualify for loans, but is ultimately designed to be in their best interests.Talk to me about your borrowingHit the button below to arrange a conversation with one of my loan specialists to find a deal that's best for your situation. Chat to us today We partner with over 50 lenders so you can find the perfect solutionFollow Facebook Linkedin Do you have questions about mortgages or loans?Ask us in the comments below … [Read more...] about Why banks assess your home loan re-payment capacity at higher interest rates

Property investors have enjoyed a golden run over the past five years, during which the national median rent increased 39.7%. However, in July, rents increased just 0.1%, which was the slowest growth since 2020, according to CoreLogic.At the same time, annual rental growth has been trending down over the past few months.Between February and July, rental growth fell from 9.7% to 8.0% in the combined capitals, although it rose from 5.4% to 7.1% in the combined regions. The big cities appear to be close to their rental affordability limit, while the regions, which have had less rental growth, might have more capacity to absorb higher rents. Despite the slowdown of the national rental market, CoreLogic economist Kaitlyn Ezzy said rents were likely to keep increasing.“Low supply will likely continue to put upward pressure on rents, albeit at a slower pace,” she said.“With dwelling approvals and commencements at historic lows, providing sufficient new housing will not be a quick fix and remains a genuine challenge for policymakers, the property industry and, of course, tenants.”In other words, while rents are likely to keep rising, tenants are likely to get some relief and investors shouldn’t budget for the double-digit-percentage increases of previous years.Need a home loan? Let's chat.Hit the button below to arrange a conversation with one of my loan specialists to find a deal that's best for your situation. Chat to us today We partner with over 50 lenders so you can find the perfect solutionFollow Facebook Linkedin Do you have questions about mortgages or loans?Ask us in the comments below … [Read more...] about Rents expected to keep growing, but at slower pace

Home loan volumes have significantly increased over the past year, especially among investors. Investors committed to $10.67 billion of mortgages in May, according to the latest data from the Australian Bureau of Statistics. That was 29.5% higher than the year before. At the same time, owner-occupier borrowing activity rose 12.2%, to $18.13 billion. Investors were responsible for 37.1% of the home loans that were issued in May. Despite the surge, that's only slightly higher than the long-term average (in records dating back to 2002) of 35.9%. By way of comparison, investors' share of home loan activity bottomed out at 22.4% in 2021 and peaked at 45.9% in 2015, while owner-occupiers’ share reached a low of 54.1% in 2015 and a high of 77.6% in 2021. If you’re thinking about applying for a home loan, here are three important tips to make yourself more creditworthy in the eyes of lenders:Reduce your spending, to free up money to pay off a loan Pay all your bills on time, to maintain a good credit score Contact a broker, who will compare the market for youNeed a home loan? Let's chat.Hit the button below to arrange a conversation with one of my loan specialists to find a deal that's best for your situation. Chat to us today We partner with over 50 lenders so you can find the perfect solutionFollow Facebook Linkedin Do you have questions about mortgages or loans?Ask us in the comments below … [Read more...] about Property investors very active in the market

Record property prices are proving to be good news for vendors, with 94.3% of all vendors in the March quarter selling their home for more than they'd originally paid, according to CoreLogic. That was the fourth consecutive quarterly increase and the highest share since 2010. However, the share of vendors who made a gross profit varied significantly from capital city to city, reflecting different market performance. Another significant finding was that house owners were more likely to record a profit than unit owners, by a share of 97.1% to 89.0%. Also, there was a clear link between the amount of time someone had owned a home and the size of their profit. Vendors made a median profit of $82,000 with a hold period of up to two years, $275,000 for up to 10 years, $435,000 for up to 20 years and $780,000 for up to 30 years. Need a home loan? Let's chat.Hit the button below to arrange a conversation with one of my loan specialists to find a deal that's best for your situation. Chat to us today We partner with over 50 lenders so you can find the perfect solutionFollow Facebook Linkedin Do you have questions about mortgages or loans?Ask us in the comments below … [Read more...] about New vendor data shows interesting sales trends