So your house is worth a lot more, but what do you do with it? Well, today I’m gonna share with you some of the things I see my clients doing with their equity. Obviously this is generic advice, if you need more personalised advice, contact a nice financial advisor like myself.
I see a lot of my clients doing things which fall into two categories.
- Investment
- Lifestyle
Investment
Getting a home loan top-up can carry its own risk, so investing in shares with a home loan is not my favorite.
Having shares go down in value or not generate enough income while interest rates head up, would obviously not be nice. However gains can be made also, especially during times of low home loan rates.
Using your equity as a deposit to purchase an investment home which generates a healthy amount of rent can be a way of offsetting the interest rate risk while getting gains. Article on yield and gain.
There is also some argument for doing absolutely nothing with your equity, because you might use it in the future for something, like buying a bigger home.
My favorite thing is probably using the increase in value to renovate to create another space which can be rented to a boarder. This increases the value of your home as well, if done properly. It has the added benefit of being able to help you pay down the overall home loan quicker with the extra cashflow.
Lifestyle
Buying a new car or using a top-up for a holiday is not ideal. However renovating and improving the space has dual purposes. It can improve the quality of your life as well as increase the value. Not all renovations are equal, some are more likely to improve the value over and above the amount spent.
Bathrooms and kitchens in general seem more profitable, as does increasing the foot print. At the other end of the spectrum, pools and landscaping might not always lead to the best gain.
