With the latest QV House Price Index showing nationwide residential property values for November increased 6.4% over the past year—the Kapiti Coast up 16% year on year and 3.9% over just the past three months—it’s easy to start thinking of how to start spending the gains you’ve made.
Apart from having a house that’s worth more, if you have made capital gain, you can use it for leverage. This could include getting a mortgage top up to carry out improvements on your home—just make sure they’re well planned and executed so you add value to your home without over-capitalising.
You can also use any gains to buy a rental property, a holiday home or even a business (subject to lending criteria). Other options include adding value to your property such as adding a room so you can let it out on Airbnb and add to your income streams.
It can be easy (and tempting) to use any capital gains on things that won’t add value to your home or investment—things like holidays, cars, lifestyle spending or propping up your household budget if you spend more than you earn—something that Kiwis are renowned for.
Thinking outside the square, you can also use any extra equity to help refinance high-interest debt onto a lower mortgage rate and pay it off as quickly as possible. Not only will this improve your financial situation in the short-term, it will give you more funds in the long-term to put towards KiwiSaver or paying down your mortgage.
It’s important to remember that while house prices can climb, they can also drop quickly with circumstances being out of our control—such as a global financial crash, or a downturn on the economic front at home.
If you want to make the most of your capital gain, work with a trusted mortgage adviser for impartial advice—we can help steer you in the right direction, foresee any speed humps, review your overall budget and help you structure your mortgage to make the most of your equity.
Contact us to discuss your options.