How to protect your equity against falling property market

RACQ02/08/2022
Money
With interest rates rising and property values falling, Queenslanders may be considering how they can build equity in their own homes.
Dad mum and 2 kids standing outside a house
Equity is the difference between the current market value of your property and the amount remaining on your home loan. 
 
As you pay off your home loan or if the property’s value increases, your equity goes up. 
 
However, if the market value of your property decreases, you could find yourself with less equity or possibly negative equity. 

How to build equity in your home

There are several ways you can build equity in your home:
  • You could increase the value of your property by renovating or making improvements to your home.
  • Reduce your loan balance by making more regular or larger repayments. Instead of paying monthly, change your regular repayments to fortnightly or weekly.  Alternatively, rather than treating yourself when you get a work bonus or refund, put this money to work by depositing it into your home loan.  Make sure you check if there are any restrictions set out by your loan on how much extra you can repay or if you can access the funds.
  • Open an offset account if your loan account has this option – any money you put in this account is deducted from your loan balance, meaning you are only charged interest on the difference. For example, if your mortgage is $450,000 and you have an offset of $50,000, you will only pay interest on $400,000 of your loan balance.

Reasons to unlock your equity

Once you have built up enough equity in your home you may want to access it. You can generally only borrow up to 80% of the property’s value before Lender’s Mortgage Insurance (LMI) becomes payable. 
 
Rather than saving up a deposit, you may want to use the equity in your existing home to buy an investment property.
 
You could also access your equity to renovate or extend your current home or use it for other purposes like buying a car or diversifying your wealth portfolio by investing in other assets.
 
Speak to one of our Lending Specialists to better understand your options.
 
Banking and loan products issued by Members Banking Group Limited ABN 83 087 651 054 AFSL/Australian credit licence 241195 trading as RACQ Bank. Terms, conditions, fees, charges and lending policies apply. This is general advice only and may not be right for you. This information does not take your personal objectives, circumstances or needs into account. Read the disclosure documents for your selected product or service, including the Financial Services Guide and the Terms and Conditions, and consider if appropriate for you before deciding.
Except for RACQ Bank, any RACQ entity referred to on this page is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Cth). That entity’s obligations do not represent deposits or other liabilities of RACQ Bank. RACQ Bank does not guarantee or otherwise provide assurance in respect of the obligations of that entity, unless noted otherwise.
 
AffordabilityBorrowingHome loanLoansInvestingProperty

Subscribe to our newsletter

More articles

Related topics

Things to note

The information in this article has been prepared for general information purposes only and is not intended as legal advice or specific advice to any particular person. Any advice contained in the document is general advice, not intended as legal advice or professional advice and does not take into account any person’s particular circumstances. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives and needs.

Insurance Products (excluding Travel Insurance) are issued by RACQ Insurance Limited ABN 50 009 704 152 (RACQI) and arranged by RACQ Distribution Services Pty Ltd (RDS) ABN 35 116 361 650, AFSL 567130 and RDS' authorised representatives (including RACQ Operations Pty Ltd ABN 80 009 663 414, AR No. 234978 (RACQO)). Conditions, limits and exclusions apply.

Any advice provided by RDS and RACQO is general advice only and does not take into account your personal objectives, financial situation or needs and you will need to consider whether the advice is appropriate for you. Read the Product Disclosure Statement (PDS) before making a purchase decision on the product. You can also access our Target Market Determinations on this website.

RDS receives a commission from RACQI for the policies it arranges. RACQO receives fees paid for services it provides to RDS. Further details about remuneration are available on request prior to purchasing.

Banking and loan products issued by Members Banking Group Limited ABN 83 087 651 054 AFSL/Australian credit licence 241195 trading as RACQ Bank. Terms, conditions, fees, charges and lending policies apply. This is general advice only and may not be right for you. This information does not take your personal objectives, circumstances or needs into account. Read the disclosure documents for your selected product or service, including the Financial Services Guide and the Terms and Conditions, and consider if appropriate for you before deciding.

Except for RACQ Bank, any RACQ entity referred to on this page is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Cth). That entity’s obligations do not represent deposits or other liabilities of RACQ Bank. RACQ Bank does not guarantee or otherwise provide assurance in respect of the obligations of that entity, unless noted otherwise.

RACQ Bank subscribes to the Customer Owned Banking Code of Practice which establishes higher standards than the law requires. The Code reflects modern consumer expectations and developments in approaches to issues such as consumer vulnerability, guarantors, and supporting customers through financial hardship. Please read our Customer Owned Banking Code of Practice page for more information.

RACQ Operations Pty Ltd (ABN 80 009 663 414, AR No. 234978) and Members Travel Group Pty Ltd (ABN 45 144 538 803, AR No.432492) (RACQ) are authorised representatives of the RACQ Travel Insurance insurer Tokio Marine & Nichido Fire Insurance Co., Ltd. (ABN 80 000 438 291 AFSL 246 548) (Tokio Marine). Tokio Marine Management (Australasia) Pty Ltd (ABN 69 001 488 455, AR No. 1313066) is an authorised representative of Tokio Marine, and administers RACQ Travel Insurance as the managing agent on behalf of Tokio Marine. Terms, conditions (including eligibility criteria), exclusions, limits and sub-limits apply. Any advice is general advice only, and does not take into account your specific objectives, financial situation or needs. Before you purchase, please consider the Combined Product Disclosure Statement (PDS) / Financial Services Guide (FSG) and Target Market Determinations (TMDs) available at racq.com or on request from RACQ.