The power of equity - build wealth with a home equity loan

Ever wondered how others can afford to invest in shares, buy property or even improve their lifestyle? The answer could be home equity.

Unlocking the money you have in your home can let you access a whole range of opportunities that might otherwise be out of reach. You can use an equity loan for almost anything: investing in property, buying shares, purchasing a new car, renovating your home, paying school fees or taking a holiday.

What is equity?
For most people the largest source of equity is the family home. Equity is simply the value of your assets minus your debt. For example, if your home is valued at $300,000 and you owe $200,000 on your loan, you have $100,000 in equity. Your equity can increase over time as you reduce the amount you owe and/or your home grows in value.

How can I access my equity?
A reputable lender will generally lend you up to 80% of the assessed value of the property offered as security (and possibly higher with Lenders Mortgages Insurance) subject to an assessment of your income, expenses and other debts. If your equity loan is to purchase an investment property, the value of the existing home and the new property will be assessed.

Growing your future wealth today
Because an equity loan is secured by the equity in your home, you may be able to purchase a second property without a cash deposit. In some cases you can even borrow more than the full purchase price to cover added fees and charges.

You should keep in mind, however, that there are always risks when investing. Customers should seek advice, be comfortable with the amount they are borrowing and understand that there may be implications on their repayment amounts.

By unlocking the equity in your home you can access a range of opportunities to improve your lifestyle or create wealth for the future. So if you've been putting off that holiday or investment plan, now could be a good time to take advantage of your equity.

Next article

Investing in a house or apartment - which is best?

Related links

• The A-Z of home equity - Edition 27 Autumn/Winter 2007
• How to cut the costs of buying a home - Edition 12 Summer 2004