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Equity, in lending terms, is the net value of your property after taking out existing mortgage balances.
Bearing in mind that lenders adopt a loan to valuation ratio (LVR) of 80% of your property value (90% if you want to pay mortgage insurance or meet certain professional employment criteria), the equity value that a lender applies is scaled back to reflect that 80% LVR.
Take a home worth $750,000 with a mortgage of $350,000 – you have $400,000 in equity built up. Adopting the 80% LVR rule from a lender perspective your usable equity is:
$750,000 x 80% = $600,000, subtract $250,0000 = $250,000.
This equity then allows you to:
When its used to build your wealth, equity can be a very powerful tool.
If you would like an idea of what your equity is and what it means for you in terms of growing your wealth, hit us up for a chat and let’s make this year, the year to get ahead.
Contact Bribie Island Lending - mark@bribieislandlending.com.au
We are based on the beautiful Queensland coast, between the Sunshine Coast & Brisbane and we offer a complimentary home loan broking service.
Make an appointment today for an obligation-free chat, to talk about what you need and how we can help.
*This article is general information only and does not constitute financial advice. Your personal circumstances will need to be assessed before any product or proposal is recommended. Mark Hind is an Authorised Credit Representative (ACR 519951) of Outsource Finance Pty Ltd, Australian Credit Licence 384324.
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