Unlock the wealth in your home without selling – make your home equity work for you.
House prices have jumped by more than 70 percent in the past 10 years to January 2016 across Australia’s combined capital cities —so there’s a lot of wealth locked up in real estate, however there are many ways you can make your biggest asset work harder for you, without reaching out to your real estate agent to sell.
Refinancing, renovating, property portfolio building, and even the potential of solar power could help you make money – which is great news for Aussies who may not want to move house.
In 2016, Australians had racked up almost 50 percent of equity on their properties—over $240,000 on average. But what is home equity? It’s the portion of your property value that you truly own calculated by the difference between the amount your home is valued at on the current market, and how much money you still owe on it.
Get renovation returns
Busting the myth that selling is the only way to make money from your property starts with renovations.
Aussies have DIY in their DNA and almost 8.4 million (or 62%) of Australia’s homeowners renovated in the past year.2.2 million spent more than $5,000, with more new homeowners renovating compared to Aussies who’ve lived at the same address for over five years.
“Landscaping, outdoor entertainment areas, extensions and internal renovations can all add value to your home,” says Ray White Sales Director, Neil Robson.
How much value? The Real Estate Buyers Association have said that adding one extra room could add up to $200k to the value of the property, which is a rewarding gain considering the investment.
While you may not be in the position to upgrade the kitchen, add a new bathroom or a new outdoor area, you can also start small. A new coat of paint on the interior or exterior can also add value for a lower initial investment.
Of course, the bigger the renovation, the higher the cost and unlocking your equity to renovate may mean servicing a larger loan. And you also need to consider the risk of over capitalising on your property.
A good place to start is talking to an Aussie Broker. They can explain the options which may be available to you—helping to put you in control of your longer term goals.
Build your Property Portfolio
Instead of selling your property, you could consider investing in another property. If you use the equity of your existing home as a deposit for an investment property, you may be able to boost your wealth with a regular rental income and capital growth.
How much could you earn? That depends on a number of factors, including where you buy, the cost of looking after your investment and the potential capital growth of the property.
To get going, you usually need a deposit of 20% of the value of the property. A bigger deposit may make it easier to secure your loan. And if you are refinancing to access your equity as a deposit, you will usually need to pay Lenders Mortgage Insurance (LMI) if the loan on your existing property is more than 80% of its value.
Harness the potential payback of solar
Solar power is another way you could make money. While solar feed-in tariffs may no longer provide much of an incentive, over 50% of Aussie households with solar have cut their energy bills in half.
Research has also shown that a home with solar is perceived to be more valuable, and renters are willing to pay more if the property has solar.
And for now at least, government rebate schemes mean you can still get an upfront discount for residential solar installations. If you can manage the upfront costs, you could be left with worthwhile savings and returns down the track.
This is great news, but how do you access equity?
Start with finding out how much equity you have in your home. To unlock its value, you can refinance your mortgage based on the increased value of your home.
The amount you may be able to borrow will depend on the current value of your property, how much security is required by your lender, and your ability to service a bigger mortgage. Your age and job status will also be a consideration.
Make money by staying, not selling
Unlocking your home equity could be less complicated than selling your home. Whether you’re thinking about refinancing to renovate or build your property portfolio, you could be making your equity work harder for you, without leaving home.
You may also find these Aussie insights useful in deciding whether unlocking your home equity is the right move for you: 5 smart ways to use home equity and how to buy an investment property using equity.
To find out more, talk to your Aussie Broker today.