HOW TO FIND THE HIDDEN DOOR TO THE FUTURE OF YOUR FAMILY’S FINANCIAL SECURITY?
READ ON.
A large percentage of New Zealanders will eventually purchase their own homes, for most, it will be the most significant purchase they will ever make. Purchasing a home is a good investment, enabling you to be lining your own pockets instead of your landlord’s, but what if you could use such an investment to benefit more than just yourself?
If there was another way to use what you have, to do what you can with it, for the benefit of your family, that would definitely be worth looking into, wouldn’t it? Well, there is a way, it’s called home equity, and it’s the hidden door to literally thousands of people, which can open up a brighter, more fulfilling future.
Let me go a little deeper for you. Home equity is an asset that refers to a homeowner’s interest in a home. To calculate home equity, subtract any outstanding loan balances from the property’s market value. Home equity can increase if the property value increases or the loan balance is paid down.
Here’s how it works.
Imagine you own a property valued at $450,000 and have $300,000 owing on the mortgage. That means you have $150,000 home equity in that property (33% equity) at the time of valuation.
In other words, home equity is the portion of your property that you actually “own.” You own your home. But if you needed a mortgage to buy the property, your lender also has an interest in the property until the debt is fully paid.
Home equity is typically considered a homeowner’s most valuable asset. That asset can be used, so it’s important to understand precisely how it works and how to best use its benefits.
Now, assume your home’s value doubles (wouldn’t that be incredible!) If it’s worth $900,000 and you still only owe $300,000, you have just over 66% home equity. Your debt on the property is the same, but your home equity has increased.
Equity is increased when a home’s value increases. That can happen in a healthy real estate market, or though something as simple as smart home improvements.
Equity is also increased as you pay off the mortgage, in many cases the loan is paid toward interest and off the principal balance, so in that case (assuming the house value stays the same) you would build home equity at an increasing rate each year.
Okay! So what does all this me to me?
Your home equity is an incredible asset, and there is a lot you are able to do with that asset. Typically, as people are paying off their mortgages, in many cases they are also starting a family of their own. Their home becomes their most significant investment, and eventually, the kids all grow up and leave, leaving that investment idle.
There is a way for you to help your children avoid the ‘renter’s market trap’ lining the pockets of landlords.
Do Something!
If you own your own home and have home equity within it, when your children want to leave, you may be able to look into using that home equity you have within your first home, to purchase another house.
Then if your children move into that second house, and pay rent for it as they would renting, they are contributing not to a landlord but instead building their families property portfolio that they may one day, inherit.
Here at ARBEZ we have a saying, “Assets can create further assets. Get your assets off the couch and have them working a bit harder for your future!”
Want to know more about how to make your assets work for you? ASK us!
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