There are a lot of great reasons to own
real estate, but one of the most powerful is the ability to use equity to
purchase another property.
If you’ve owned a home for a number of years, you might be able to access some of the equity to use as a deposit for another home.
Here are some of the advantages of using equity:
No need for another deposit
The most important element of accessing equity is that it removes the need to save for another deposit. Often times, it’s first home buyers who have the hardest time getting into the market as they typically have low savings and modest incomes.
However, after seeing a few years of capital growth, you might find you’ve been able to build up enough equity in your first home to continue growing your property portfolio. This could be an investment property or one that you want to live in at some point. Either way, the fact that you didn’t have to save the second deposit can really make this next step a lot easier.
Speeds up the growth of your portfolio
After you’ve built up that equity base, the path to growing your portfolio becomes a lot easier. Once you have tapped into the equity on your first home, you can then purchase a second property. With both of these properties potentially growing in value simultaneously, you can generate even more equity down the track.
If you were to try and save for every deposit instead, it would take a lot longer.
Not getting left behind
If you’re wanting to try and eventually get into your dream home, it’s going to take some time. As house prices continue to rise, it is getting harder and harder for many to get over the deposit hurdle.
By using equity and growing an investment portfolio, you’re building capital in line with the market. So, not only will you not be left behind, you’ll actually be ahead when the time comes to try and buy that dream home.
While it’s great that you’re building equity, it is also important to remember that you will still need to be able to service any loans that you take out based on your financial circumstances.