What is property equity?

In simple terms, property equity is the difference between your property's current market value and the amount you still owe on your home loan. For example, if your home is worth $800,000 and your remaining mortgage balance is $500,000, your equity is $300,000.

Equity grows over time in two main ways:

1.       Payingdown your mortgage – As you make repayments, the loan balance decreases, which increases your equity.

2.       Property value growth – If the market value of your home rises due to demand, renovations or market trends,your equity can increase even without extra repayments.

Building equity can open up financial opportunities. Many homeowners use their equity to:

·       Renovate or improve their property – enhancing your home can increase not only the comfort of your home but also potentially boost value.

·       Invest in another property – equity can be used as a deposit for an investment property, helping to grow your property portfolio.

·       Consolidate debt – some people access equity to pay off higher-interest debts, streamlining their finances.

However, it’s important to understand that accessing equity through refinancing or a loan increase means taking on more debt. This can be beneficial if used wisely, but it’s essential to consider the risks and ensure you can manage the repayments.

Regularly reviewing your property’s value andyour loan balance can help you keep track of your equity. With a solid strategy, equity can be a powerful tool for building long-term wealth and achieving financial goals.

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