What is Equity in Real Estate?
Equity in real estate refers to the difference between what you owe on your mortgage loan and the current market value of your property. For example, if you bought a home for $200,000 and have paid off $50,000 of the loan principal, then you would have $50,000 worth of equity in your home.
Equity can be an important factor when it comes time to sell your house. If the market value of your home has increased since you purchased it then you will be able to make a profit from the sale. This profit is essentially made up of two components: appreciation (the increase in price due to market forces) and equity (the amount that you have paid off from your initial mortgage).
Equity is also powerful tool that can be used to finance the purchase of another property. Using this strategy utilises the value that has been built up in an existing home or investment property, by leveraging it as collateral to obtain funds for a subsequent investment. Essentially, it involves taking out a loan against your existing home's equity, which can be used as a down payment for an additional property.
It is also possible to build equity by making extra payments on top of what is required by your mortgage lender each month. By doing this, you are reducing the amount that you owe on the loan principal and increasing your equity in the property over time. As with any type of investment, there are risks involved with building equity such as changes in interest rates or fluctuations in housing prices so it’s important to do your research before committing to any plan.
Understanding what equity means in real estate can help you make smart decisions when purchasing or selling a house. Having a good understanding of this concept will help ensure that any investments you make in real estate will be successful ones!
With careful consideration and understanding of the available options, leveraging equity to buy another property can be a smart and profitable real estate endeavor. To find out what equity you might hold in your personal home call one of our friendly team today. They can value your property which you can then use to estimate your equity. Once you have an idea of how much you have to work with our team can show you some great investment options.
Call 09 3030 601 and ask to speak with a sales team member today to get started building your investment portfolio.