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- Three Tips to Leverage your Home Equity
The more you invest in your home, the more flexibility you could have with your home loan. Are you getting the most out of your equity?
Equity is the amount of your property that you own, which you can calculate by taking the total value of the property and subtracting the home loan component. For example, if you have a $300,000 property and a $200,000 mortgage, your equity in the property is $100,000.
Equity becomes important when you want to do something with your finances that requires security. Here are three things you could do by leveraging the equity in your home.
2. Borrow for other reasons
Having equity in your home gives you the freedom to borrow more for activities such as purchasing an investment property, funding a holiday or undertaking renovations.
For instance, you could ask for a 'top up' on your home loan, where you use your home equity to increase your home loan amount to make your dreams a reality. You could take a percentage of your equity to renovate your home and you could increase its value.
It is usually cheaper to use your home loan to do this than to apply for a personal loan for the same amount, but be sure to read the fine print carefully as the borrowed amount is usually for a longer period than a personal loan. Be sure to consider your personal circumstances when making a decision.
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