They say there’s no place like home, even more so when you own your own home. As a member of the mortgage club, you might be wondering what your next steps should be. Since you already understand the graft, time and sacrifice that real estate demands, maybe building a property portfolio is for you? After all, it can be a safe place to park capital for you and your children.
How to use the equity in your home
Home equity is the investor’s friend. It gives you the leverage to buy a better house or invest. But what is it? Equity is the difference between what you owe and what your property is worth.
The more neighbourhood prices have risen since you bought, the bigger your slice of equity cake could be. To calculate what your equity is, start with a property valuation. A real estate agent, bank or registered valuer can do this for you. Depending on your situation, you could borrow up to 90% of your property’s value.
If your equity looks more like crumbs than the cake you expected, consider growing it. Commit to larger monthly repayments, or open an offset account to reduce interest. An offset account can reduce the amount of interest you pay on your home loan, by using money in your everyday and savings accounts to ‘offset’ your home loan interest charges. A clever renovation is another way of growing equity.
What’s your property investment strategy?
Are you looking for rental yield, based on factors like property type, location and the economy? If you’re on a high income and the mortgage is covered, do you prefer capital growth? Ideally, you’ll find both. Do get good professional tax and financial advice. As the old saying goes—pay peanuts and you get monkeys.
Research phase
Once you’re ready to rock, research begins. Learn what markets are hot and not, and pick an area. Then there are rental returns, demographics, median prices and clearance rates to consider. What will your rent to repayment ratio be? Are public transport upgrades or new schools coming which will drive capital appreciation? Is an overlooking high rise planned for the next street? Research is your new busy!
Getting finance
A good mortgage adviser will help assess your equity, know how to unlock it and suggest the way forward. They will also help with pre-approval, which is a lender’s in-principle agreement that you can borrow to buy property. There is no guarantee with pre-approval that you will get final approval, but you can now proceed forward and start hunting out great properties to run past your mortgage provider.
Get in touch with our local in-house Mortgage Advisor, Teresa Payne on 021 510 636 or [email protected]. Remember, you don’t need to be loaded to have an awesome property portfolio.
