Ultimate Guide to
Your Home Equity

+ What you can use it for

Directory on the Different Types of Home Loans

Ultimate Guide to Your Home Equity
+ What you can use it for

So you’ve finally built up some equity in your home. Congratulations! That’s something to be proud of. Now you’re wondering “how do I access equity in my home?”

Think of your home equity as a financial safety net. A cushion that you can fall back on in case of an emergency, or to help finance a big purchase. Here’s everything you need to know about your home equity, what you can use it for, and how to get the most out of it.

What is Home Equity?

Home equity is the difference between the market value of your property and the amount you still owe on your mortgage. It’s essentially the equity or ownership that you have in your home and it can be used as a financial asset for borrowing money or investing.

home equity

How to calculate equity in a home

Here’s how to calculate home equity: subtract the amount of your mortgage from the current market value of your home. For example, if you bought a house for $500,000 and have remaining $200,000 in existing loans, then your home equity is $300,000.

However, not all of your equity on home can be used. There is what we call usable equity, which refers to the equity in your home that you can actually access and use to increase your borrowing capacity.

How to work out your usable equity: calculate 80% of your property’s current value minus what you owe on the mortgage. The reason for this is that the lender will only allow borrowers to borrow up to 80% of the current value of the property without having to pay the LMI premium.

For example, if your home is valued at $500,000 and you owe $200,000 on your mortgage, your usable equity will be calculated as:

$500,000 x 0.8 = $400,000

$400,000 – $200,000 (existing loan) = $200,000.

Your usable equity is
$200,000.

How to use the equity in your home: step by step

Step 1: Calculate Your Equity

First thing you need to do is to figure out what your property’s current value is. To do this, you may get a property valuation from a real estate agent or your chosen lender. They are usually free and will take into account other properties in the area, data on recent sales, and the features of your property. Alternatively, you can also ask a Sunshine Coast mortgage broker to help you get a good estimate of your home equity. Then to work out the actual figure, you can use an online home equity calculator or use the calculation we outlined above.

Step 2: Choose the best option for using your equity

Once you know how much equity is available, it’s important to find the right loan product for your needs. There are a few different options available depending on what you are looking for, such as a line of credit, reverse mortgage, or a standard equity home loan. Each of these products has its own advantages and disadvantages that should be taken into consideration before making any decisions. We recommend talking to a home loan broker Sunshine Coast to know how to use equity in your home in such a way that you can maximise its benefits.

Step 3: Understand the terms and conditions of your loan

First thing you need to do is to figure out what your property’s current value is. To do this, you may get a property valuation from a real estate agent or your chosen lender. They are usually free and will take into account other properties in the area, data on recent sales, and the features of your property. Alternatively, you can also ask a Sunshine Coast mortgage broker to help you get a good estimate of your home equity. Then to work out the actual figure, you can use an online home equity calculator or use the calculation we outlined above.

Step 4: Compare different lenders

Shop around for lenders offering competitive interest rates and repayment plans that fit into your budget. Research customer reviews to get an idea of what people experience when they work with each lender.

Step 5: Prepare necessary paperwork

Be prepared to submit copies of income tax returns, bank statements, payslips, proof of identity documents etc., as well as any other relevant information requested by the lender.

Note:
Mortgage specialists and experts on Sunshine Coast loans can help you throughout this process so you can proceed with your home loan application with the least time and stress possible.

What you can use home equity for

Home equity can be used in a variety of ways, depending on the homeowner’s needs and financial situation.
home equity

Buying second home using equity to buy second home

home equity

Home renovations or improvements

home equity

Buying a car

home equity

Going on a holiday trip

home equity

Deposit on an investment property

home equity

Other investments like shares, secure bonds, managed funds, or other asset class

home equity

Wedding

home equity

Debt consolidation

home equity

Savings - your home value goes up over time!

home equity

Refinancing your home loan

Financing your child’s education

How The Home Equity Loan Works

What is a home equity loan? It is a type of loan that lets you borrow money against your home equity. Like a standard home loan, lenders will lend you 80% of the property value you want to purchase.

Here’s the real kicker: you can access your usable home equity for your deposit (typically 20% of the property value so you don’t need to pay the Lenders Mortgage Insurance premium) — so you will not have to present a cash deposit upfront. Remember that usable equity is only 80% of your actual home equity.

Home equity loans are popular in Australia because they offer borrowers a way to borrow money at a lower interest rate.

Frequently Asked Equity in home

The first thing to do is to know what your property is worth currently. For this you will need to get a property valuation. Then, you can calculate your usable equity by taking 80% of the property value, then subtracting from it what you still owe on your mortgage.

You can use the equity in your home or investment property as a deposit on a second property, while your current property becomes a security on the new debt. Using equity allows you to buy a second property with no cash deposit.

Yes, as with any form of borrowing there are some risks involved when taking out a loan against the equity in your home. If you are unable to make consistent payments on the loan then this could risk putting yourself into further financial difficulty or even foreclosure if it becomes too difficult for you to manage financially. It is important that before committing to a loan against your property that you fully understand all terms and conditions associated with it so that you know exactly what is expected from yourself before signing anything legally binding.

This will depend on which lender you choose and how quickly they can process an application for a loan against your property’s existing equity. Generally speaking though the process isn’t particularly lengthy – depending on circumstances most lenders should be able to provide an answer within 4-6 weeks from start to finish including legal paperwork etc..

This depends on how much existing debt remains on your property and also how much additional money is being added via a refinance or consolidation option through another lender. Most banks prefer that only up to 80% of total development costs are covered by their own funds; meaning that if more than this needs funding then the remaining amount needed has to come from other sources like personal savings and income etc.

Having an increased level of home equity can give homeowners greater financial security and flexibility, enabling them to make necessary repairs or renovations on their property without having to take out a large loan, or fund other major purchases such as education fees. Furthermore, having substantial amounts of equity may also allow you to access cheaper loans with lower interest rates since lenders will view you as a safer borrower with less risk involved.

No – unless used towards repairs / renovations which could increase its overall market value over time. Otherwise just having access doesn’t necessarily affect its current values.

Before taking out any form of loan against the equity in your home consider seeking professional advice from a qualified finance broker who will be able to provide advice tailored specifically for one’s current circumstances

What our Clients Say

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I’ve recently had the pleasure of working with the team at Sunshine Coast Financial Solutions to secure a new mortgage. Throughout the entire process, communication was clear, professional & friendly. I was kept up to date and was well informed every step of the way. I wholeheartedly recommend Sunshine Coast Financial Solutions to anyone in need of expert mortgage advice & assistance.
This is the 3rd time we have used SCFS, this time for an investment property and refinance overall.Chris advised us to what our best options were taking into account taxable nature of investment and how best we structure between that and our owner occupied.The team at SCFS found us a much better rate overall and have infact reduced our monthly payments.Chris and team (Adam, Darryl, Shanina) keep you updated every step of the way and make the process seamless and easy even when we have had more complicated lending requirements.We have had the pleasure of referring several of our friends to SCFS who have been equally impressed. We are based in NSW, and absolutely no issues being in a different state.If you are after a personal service, and one that continues to proactively manage the best deal for you ongoing this team will look after you.
Very helpful team with excellent communication throughout the whole process. Would definitely use again and highly recommended!
The team was friendly and very easy to deal with. They made the process of getting a loan easy by walking us through every step.
The experience we had with Sunshine Coast Financial Services was incredible. They were professional, knowledgeable and reassuring from the start of our house purchasing journey right to the finish.Apart from all the team, we were lucky enough to have Daryl Hermann assisting us.He was so positive, helpful, encouraging and always happy to answer any questions that I had and there was plenty….Thanks to SCFS we are now the proud owners of a home we could only have dreamt of.Without a shadow of doubt I would highly recommend anyone looking to purchase a home to give these guys a call.I know I certainly will when I choose to purchase another property.
Easy to deal with, happy with the results
Very supportive, available, thorough and professional- highly recommend.
My partner and I were super keen to get into the property market and reached out to Chris and his team as a result from reading these outstanding reviews and they did not disappoint. The team have been nothing but transparent throughout every process of building our first home and answered all our questions in record time. Thank you for your continuous support! Anyone needing assistance needs to look no further then SCFS! If I could put 10 stars I would.
Just wanted to thank Chris Wilson and Tracey Butler for looking after me again with my home loan. My fixed rate is expiring soon. Weeks ago Chris contacted me to discuss my options, the process and a plan of attack.Tracey diligently stepped in right on cue and executed the plan with a superb outcome. A better than expected interest rate, not just for now but for the future of my home loan. I couldn't be happier.This team makes you feel like they step into their customers shoes as if it was their own home loan. They strive to do everything they can for their customers and in such a friendly and professional manner. Thank you again Chris and Tracey.
Efficient, helpful and honest advise. Highly recommend
What a treat it was to work with Chris and his team, they are extremely professional and we're able to find me a much better deal on my home loan. I'm now saving thousands each year! I couldn't recommend him highly enough 👍
Sunshine Coast Financial Solutions worked magic for this first home buyer. The home-buying process is very daunting for newcomers, when searching for your dream home it's hard to know the usual steps and who to trust. Chris and Adam from SC Financial Solutions provided professionalism and attention to detail each step of the way, helping to relieve stress and bring peace of mind knowing we were in safe hands throughout this life changing decision. I'll recommend SC Financial Solutions to everyone searching for an award-winning knowledgeable, reliable and responsive brokerage team.
This new homeowner is thrilled to leave a review for Chris and his colleague Adam at Sunshine Coast Financial Solutions. These mortgage wizards worked their magic on a loan for me, comparing all leading banks of Australia, with a great result. Their efficiency and advice meant I could make a fast and easy settlement. Chris and his team have made our first home buying experience so much easier.If you need a mortgage, I couldn’t recommend enough🌞🏡 Sunshine Coast Financial Solutions 🌞🏡
Excellent service, fast and efficient. I have been using the SCFS team for years and recommend them to anyone for finance solutions. You lean back and relax while they do the hard work and find you the best deal. Very happy 😊
Today is approval day something I did not think I would be doing in this day and age with how life has been but thanks to the team at SCFS it's all been made possible and easy couldn't recommend a greater team, will definitely be using them for my next few houses
I've been using Sunshine Coast Finance for a number of years over which time they have taken care of the finance for 3 properties, I can't recommend them enough.
On behalf of my wife and I, We highly recommend Chris and his team for your financial needs. They made our process feel smooth and enjoyable, and we will definitely be returning in the future for their services.
My husband and I have worked with Daryl for a while now and the experience has been nothing but beyond exceptional. The work he puts in to help us is incredible. We would be lost without his expertise and guidance. We couldn’t recommend Sunshine Coast Financial Solutions more highly.
It was the first time for me to buy a house. I really had no idea how complicated it is. The Sunshine Coast Financial Solutions team support was amazing; they took care of everything and negotiated a very convenient interest rate. The communication was also fantastic. Great result with a minimum effort. Highly recommended
Absolutely amazing service. From start to finish the communication was 100%. We were kept up to date throughout the entire process and always felt supported. Daryl was so easy to talk to, responded to every question we had and I cannot thank him enough, we really appreciate all that he did for us. I will not hesitate using their service again in the future and have passed on their details to friends! Thankyou again for everything!
Excellent professional and friendly service, excellent communication, kept us informed throughout process. Highly recommend
The team at scfs are awesome. Thank you so much for making my home refinance a breeze. I've been asked by few people now, how I got this so quickly. I said "my broker is the gun". Thank you so much Chris, Shanina, Adam, Daryl and Tracey, for all your hard work, and dealing with me. Definitely 5 stars👍
I highly recommend Chris and his team @ SCF Solutions to anyone going through a divorce or any other life transition that involves financial decisions.Chris’s expertise, practical approach, and easy-going nature provided the clarity I needed to make informed decisions about my financial future. Chris’s open and honest manner empowered me with a strong understanding of my financial position and lending capability which eased the burden associated with the division of the matrimonial home. He treated me like a priority and provided valuable guidance and support every step of the way as I navigated through an emotionally challenging time.Communication during critical times in the process such as loan approval and settlement was outstanding, even when this fell over the Christmas/New Year period. Someone from his team was always available to answer any questions or concerns and provide reassurance when needed.Second time I have engaged Chris over the past 8 years, and I can proudly say I will remain a lifelong customer!If you want the best possible mortgage to suit your specific financial situation then you can’t go past Chris and his team.
Chris and his staff members are always very helpful and informative.
Another brilliant experience with the SCFS team. Excellent from start to finish - thanks so much Chris and the team 👍
Excellent, thank you
My partner and I had Jo and Shanina from SCF help us with our home loan, everything was quick and effortless which is what we wanted. Highly recommend them!We also just had a 1 year review from Tracey and she ensured we were still getting the best rate 🙂
Chris and his team have helped me again to buy a property which was a stress free and quick process. I have complete trust in Chris and would highly recommend his business.
Chris and the team have been very helpful throughout the process keeping me informed every step of the way.SCF saved me lots of money from my current loan and will keep an eye on it from now on.Well done team
Adam and the team made our process super easy and they were very helpful. Would definitely recommend them ☺️
Chris and his team made financing our new home purchase a smooth process that left nothing to chance. With his support we were able to confidently bid on and secure our dream home and he made sure we had the very best deal we could achieve in record time.Chris coached us through each step and was always available to answer our questions and provide guidance when we needed it.Overall his team is professional, friendly, helpful and always approachable.We couldn't have achieved the result we did without his help and we would definitely use his services again.We can thoroughly recommend Sunshine Coats Financial Services and Chris Wilson to anyone looking to arrange their finance. You won't be disappointed!
Chris & the team have been fantastic from start to finish. Patient, professional & supportive throughout the whole property purchasing journey. They have gone above and beyond to help me into a property, I am very happy with my experience from start to finish. I can’t speak highly enough of their transparent and professional approach.
Once again, Chris and the team at SCF have provided us with excellent service. They are professional, efficient and always available to answer questions and concerns. We would highly recommend them.
I recently purchased my home using the SCF Solutions for my financial needs, and I must say that I had a fantastic experience. The person who handled all my transactions on my behalf, Daryl Hermann, was extremely meticulous and efficient. His attention to detail and promptness in completing all the necessary tasks left me truly grateful. I highly recommend SCF Solutions for anyone in need of financial services. Thank you, Daryl, and the entire team at SCF Solutions for your outstanding support!
Chris and his team were absolutely fantastic.Clear and transparent from the start, SCF made the experience of buying our home seamless.Highly recommend SCF for your lending solutions.
So much thanks to Chris and the team at SCFS. We had a very difficult and compressed settlement subject to many finance extensions. The whole way through the journey the whole team were absolutely professional and got us into our new home.I Very highly recommend there services toAll.Your sincerelyCraig Jenkins & Katherine Thompson
Adam and the team at SCF have been fantastic in finalising my re-finance. Adam provided insightful knowledge on lenders that would be more suited to my situation and the best avenues to go forward with. He achieved my expected result within a really short timeframe. No question was too silly. Can’t recommend Adam enough.
The team were amazing to work with. They made the process so easy, kept us updated on the process and gave us multiple options to achieve our goals. Couldn’t recommend them enough!!
Chris and the team make it so easy and hassle free. Cannot recommend them highly enough and wouldn't use anyone else apart from them.
Chris is very professional and always does everything to help us out!
Chris and the team were fantastic in helping us get our mortgage for our first home in Australia. They helped us through the process and were supportive, attentive and helpful throughout the entire process. I would heartily recommend SCF!
Chris was great to deal with, straight to the point and got what we needed done. Explains everything you need to know in detail.Extremely happy with the outcome 👌🏻
I am a repeat client of Chris and his team. In every experience I have had has been 100% positive. Chris and his team do everything possible to make every step through the process explained and run smoothly. I highly recommend anyone looking to finance or refinance to talk to Sunshine Coast Financial Solutions.
the scfs team were fantastic from start to finish in getting my new loan. Nothing was a problem for them. Getting everything sorted very fast. Very fast replies and always keeping you updated.I can't recommend daryl and the team enoughThanks again
Chris, Shanina and the rest of the team were so super helpful, understanding and really got the best rate for me! Not only that their communications were so clear, consistent and they were always available for help and advice! Would highly recommend to anyone!! Thank you team!!
SCFS have assisted us with brokerage a few of times now and Chris, Matt, Shanina and the team have been fantastic every time!
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