October 2016 Newsletter

UNLOCKING EQUITY

By David Servi

With Sydney teenagers (and twenty-somethings) living at home with their parents for much longer these days, sometimes a little impetus is needed to get them thinking about moving out.

A reluctance to take the plunge and leave home is understandable, given the ever-increasing prices in the property market. But the first step of the ladder has to be climbed sometime, and many parents have considered unlocking the equity in their own homes to give their kids a helping hand to get them started with a home of their own.

Spencer & Servi director David Servi says maximising your home’s financial potential by borrowing against the equity can be a good idea on a number of levels.

Despite never-ending dinner-table conversations about the Sydney property bubble and how it will soon burst and leave property investors in all sorts of trouble, savvy real estate observers think the bubble is largely a myth.

With national parks to the south, north and west, and the ocean to the east, Sydney has distinct physical limitations, David Servi says.

“With more and more people pouring in each day, and with ever-increasing demand for homes, very few categories of property are in any danger of a long-term slump,” he says. “I think the upwards Sydney property market trajectory will level off, but I don’t foresee an overall downturn. Interest rates will, at some point, rise, but I believe only by a very modest amount.”

So unlocking some of that parental capital can make sense. Property-owners who have owned their homes for a number of years will likely have paid down their mortgages to a significant extent and, without even really thinking about it much, they might well have several hundred thousand dollars potentially at their disposal – tied up in the bricks and mortar of their own home.

Of course, there’s reluctance to ‘bet the house’, but getting a home equity loan can allow property-owners to buy an investment property, to help their children buy property, to renovate their own homes, or even to set up a business. Of course, David Servi says, a reputable accountant or a financial advisor should be consulted to minimise any financial risk.

 “I believe unlocking equity in the home is a tactic home-owners should consider,” he says. “It has paid off for many people over the long term”.