Home loan FAQs
Equity is the difference between the value of your home and the outstanding balance on your home loan. Using the equity in your home, whether to invest in a new property or make improvements to your existing one, is a popular wealth creation strategy for homeowners.
Here are two ways to build up equity in your home:
- Increase the value of your home - When the value of your home rises, the equity does too. A home's value may rise because of capital growth. You may also consider performing some value-adding renovations to your home, such as upgrading the kitchen or bathroom or even building another bedroom.
- Make bigger repayments - The equity in your home loan grows as you make each repayment. If you can afford to add a few extra dollars to your regular repayments, you can also reduce the term of your loan and save the amount of interest you pay.
If you have a significant amount of equity in your home, it can open up a number of doors to use these funds. Many homeowners use equity for:
Home renovations - Many people withdraw equity for renovation because they want to add value to their property or need to renovate to accommodate changing life circumstances.
Purchasing another property - Using equity to fund the purchase of a second property is one of the best-known uses of equity. Saving for a house deposit can take years, but if you have equity used as a deposit, you may be able to buy a second property sooner.
The equity from your home or investment property can be used as a deposit on a second property, while your current property becomes a security on the new debt. This allows you to buy a second property with no cash deposit. Keep in mind that you'll need more than the deposit - stamp duty and legal fees will have to be factored in. Calculate your stamp duty here.