Home ownership allows you to generate equity as you reduce your home loan debt and the value of your home rises. But, many homeowners and buyers don’t understand how equity works and just how they can use it. This means that they could be missing out on investment opportunities.
Recent research shows that just 11 percent of Australian homeowners are using their home equity to increase their investment opportunities. However, many investors recommend using your home equity mid-way through your loan to get yourself in-front financially.
Use of Equity
Very few Australians are using their home equity to upgrade property or to buy investment property. Instead, says research, most home buyers are seeking to pay off their home loan before the end of their term.
But, with interest rates the lowest they’ve ever been, now could be the right time to start an investment portfolio. This is why homeowners should consider if they’re in a favourable position to invest now, rather than wait.
Investment experts believe that these home buyers may be passing up investment opportunities and wasting their most valuable commodity, time. Time and timing is vital to sound investment as it can allow investors to build their long term wealth quickly and effectively whilst reducing their costs.
When Equity Should Be Used
According to investment experts, you should use your home equity to invest only when you’ve reached or passed the mid-point of paying off your home loan. This is when home buyers are in the best position to use home equity as they’ve reduced their interest to an affordable level and, in most cases, they’re in a favourable financial position to manage the purchase of an investment property.
Of course, before buying any investment it is important that you consider you own personal situation and financial circumstances, and that you calculate the costs of buying an investment property. Always work out whether buying an invest is an affordable option for you, before you buy.
Are you interested in finding out more about home equity and how you can use it?If so, then contact eChoice today.
Written by eChoice