People access their equity for different reasons.
Maybe you want to make renovations to your property...
...Or perhaps it’s time to expand your portfolio.
Equity can help achieve this.
Although many homeowners and investors think nothing about accessing their equity, there are pros and cons to it.
So before you touch that equity, take a look below..
Pro – Boost Property Value
Some homeowners access equity to make improvements on their property.
If you do it the right way, this could actually boost the value of the home – beyond what you originally spent.
But you need to do some careful research before you set out on this.
It’s easy to overspend on renovations.
Especially if you don’t do your research first and aren’t careful with your budget.
Keep in mind that you don’t need to do costly renovations to add value and attract tenants.
Simple renovations like replacing the carpet or a new coat of paint can give your property a facelift.
And it costs much less, too.
Pro – Extra Money
One of the biggest perks to having equity is access to more money – without having to put your property on the market.
In addition, your borrowed funds are at low home loan interest rates.
This may be very appealing in comparison to other credit types.
Cons – Increased Risk If Used to Invest
It may be tempting to use equity for additional investments...
...But this comes with additional risks.
You’re investing with money you don’t have in your savings...
...That means if something goes wrong, you still have to pay interest on it.
That’s the best-case scenario.
You may be at risk of defaulting on the loan in a severe downturn.
Cons – Larger Repayments
Let’s be clear: equity is not free money.
It’s still a loan.
So, when you access the equity you are increasing how much you owe.
That includes your repayments.
You may be able to pay it now, but accessing your equity will increase that amount.
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