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Equity

Posted by Tamara McDowell on February 27, 2010

What is equity?

Equity is the difference between what your home is worth and how much you owe on it.

For example, if your home is worth $300,000 and you owe $100,000, you have $200,000 in equity. Over time, as you reduce the amount you owe on your home or the value of your home grows, your equity increases. It’s that simple.

Using equity to build wealth through property investment

Unlocking the equity in your home can be an effective way to assist in purchasing a rental property to help build your wealth. Residential investment properties can be a popular investment, having the potential to provide investment security, capital growth and rental income. There may also be tax advantages. Negative gearing and depreciation allowances are also popular ways to reduce your tax liability, especially at the end of the financial year. You should consult your financial and taxation advisers before determining if this strategy suits you.

If you haven’t already invested in property, making a start may be easier and more achievable than you think. The key factor is getting the right advice to help ensure you make the right decision about your loan.

What if I’m still paying off my home?

Provided you have substantial equity in your home, you may be able to release funds to start investing sooner. Remember, it’s not just about reducing the amount you owe on your home that increases your equity, if the value of your home has risen since you bought it, your equity is likely to have increased.

What can I use my equity for?

Depending on your financial circumstances, and the advice you receive from your financial advisor, you can use your equity for a wide range of purposes like a new car or renovations. You may choose to create or build an investment portfolio or to enhance your lifestyle. There are many possibilities, it’s really up to you.

By unlocking your equity you may be able to access a whole range of opportunities sooner. If you’ve been putting off that small home renovation or investment strategy until you’ve saved enough capital, unlocking your home equity can allow you to start improving your lifestyle right now.

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One Response to “Equity”

  1. Really Good Articles/posts that you have on this site. Thanks

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