Using Your Equity
Learn how the equity in your home gives you more options
When you have a decent amount of equity in your home, this gives you options which you can use to manage your mortgage and increase your wealth.
Borrowing more money from the bank is a great option for financing renovations, holidays, investments, weddings… whatever you like. Your borrowing power goes up the longer you’ve been paying your mortgage because of the equity/ownership you’ve built up in your home. It also helps that usually property will increase in value each year which increases your borrowing power.
When you refinance or refix, it’s a good time to consider whether you’d like an extra line of credit… The great thing is, by using revolving credit you can get pre-approved for this additional lending, but you only ever pay interest on the amount you actually use. This is especially advantageous when interest rates are low. Instead of putting things on your credit card at high interest rates and having to pay them back quickly, you can add to your home loan and opt to pay more monthly or extend your mortgage out. This is called debt consolidation.
For example you might have had a mortgage for 3 years but choose to refinance at a lower rate and keep your monthly payments as small as possible and borrow some more money. Usually you would keep your mortgage with 27 years to go (3 years paid already) but you’ve got the option to push this out to 30 years again. It’s not advised for everyone but it’s important you know all of your options and make the decision that is best for you in your current situation. You can also add more borrowing to your mortgage using your home as security (which it already is for the mortgage).
If you’re doing-up your kitchen or extending the house this will increase the value of your investment… but be warned that the borrowing costs might outweigh the gain in the value of your home. It can get a little confusing with all the different calculations that need to be made. Most of the time you’ll have decided what you want to pay for with the extra cash and we’ll look at the best ways for you to do this.
Because your home is where you live there will always be an element of emotion in the decision… what we’ll try to do is help you decide based on the numbers but ultimately it’s your call. Cash-back often scares or confuses some people. Because we don’t work for the banks we can present the best options for you, not what’s best for the banks.
All potential costs are estimated and included in this calculation. Sometimes banks will charge you 'break fees'. These are factored into these savings estimates.
For more info email Support@iRefi.co.nz.
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