The power of equity
Are you a Hills district homeowner with some spare “equity” sitting around your home?
If so, this ‘lazy’ equity could be just what you need to help you reach your next financial goal.
How? Through a Line Of Credit loan account.
We spoke to local Hills District mortgage brokers about this and in terms of understanding how exactly it all works, they describe it like a big credit card. It is a loan account that sits aside your main home loan where you can withdraw from the available balance at any time.
In considering this, here are some two main considerations when tapping into your home equity.
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The amount of home equity you can access
If you purchased a property some years ago by taking out a mortgage loan, then there may be some “built-in” equity to access.
How do you calculate this equity?
“It is the difference between the current market value of your property and the amount you owe to your lender”.
Here is an example:
Let us assume you took a mortgage loan of $200,000 10 years ago and your property in today’s market is priced at $300,000.
If say today, you now owe $100,000 to your lender, (meaning your loan has gone down from $200,000 to $100,000 in the last 10 years due to the repayments you have made), you’ll now have equity of $200,000.
Value of Property Today: $300,000
Less: Amount Owing To Lender: $100,000 =
Equity: $200,000.
“The opportunity you have is to cash out this “equity”. And by not doing so, you may be missing out on a chance to improve your financial future” explained Anastasia.
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The benefits of a Line of Credit (LOC) with home equity
There are many lenders who are ready to give good customers access to this equity provided it is used for either a renovation (which adds value to your property) or for a deposit towards another investment property.
One of the best ways to access the equity in your home, is through a secured Line of Credit (LOC) from your lender.
“You can think of a LOC as a credit card that you can use to withdraw money anytime you need it”.
From the above example, if the bank allows withdrawing only up to 80% of the current home equity value, you’ll have 80% of $200,000 ($160,000) readily available as a LOC.
You don’t need to withdraw all of the equity at once.
“With this LOC funding solution, you can withdraw as much money as you need, when you need it and only pay interest on the money you have withdrawn- and that’s the beauty of it all”.
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Other Useful Links:
Hill District Local Business Directory