For many of us our first experience of equity is the hard earned savings that we invested in that first home. The home may not have been perfect, but it was precious, and it was ours!
With the passage of time and perhaps the raising of children, we may have put our housing ambitions aside and just paid the mortgage each time an instalment was due.
However there may come a time as our children become less dependent, and not so much of our pay seems to be going to pay the mortgage - we find we have more and more money to spend on other things. This may well be the time to look at "trading up" to that home we could only dream about when we bought our first "beauty".
So, if we've been in our home for say 15 years and paid the mortgage over that time, how might we be looking now?
We purchased our home for $450,000 and borrowed $360,000 over 30 years at an average interest rate of say 5%. At the 15 year mark our mortgage debt has reduced to $244,381 but what is our house worth now?
If we give our home a modest 3% capital growth over our 15 years, it might be worth $705,344. That means that over the 15 years we've enjoyed home ownership our equity has grown from that hard earned $90,000 to $460,963.
To put it another way we've effectively saved $24,730 each year by just owning a home and paying the mortgage - and that's why we call it "equity a silent achiever!"
Having got to this position we suddenly have those options we could only dream about when we started!
At Thompson McNeill we're frequently taking our clients through those options to capitalize on their equity achievement.
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