If you have bought a property and are in stable financial position, it may be possible to start thinking about how you can use the value of your property for further investment.

In this section we will cover equity, the ways to borrow money off the value of your property and how it is possible to switch or extend your home loan through refinancing.

What is equity?

Equity is a financial term referring to the exchange value of an asset.

The value of your property on the market determines your equity, meaning as as the value of your house goes up or down so does your equity.

Typically, equity in property is calculated by working out the value of your your house and subtracting any money owing on it.

• For example, if you provided a $100,000 deposit (20%) to buy a $500,000 house, your equity in the property would be $100,000 and your loan (the bank's equity) would be $400,000. 10 years later, if the property was worth $1,000,000 and you still owed $300,000, your equity would be $700,000.

Borrowing off your equity

Borrowing against your equity allows you to access additional funds by using the value of your property as collateral (security) on another loan.

For example, some lenders will allow you to open a 'line of credit'.

• A line of credit facility is a feature of some home loan products that allows you to borrow up to a certain limit based on the equity you have in your property.
• In this circumstance your equity is calculated as the amount by which the value of your property exceeds your loan balance.
• You can draw from the line of credit and repay funds as needed, like a credit card. Interest is charged only on the amount borrowed.
• All lines of credit have variable interest rates, which means you might pay more in interest as rates fluctuate.

You can talk to a financial planner about using equity.