In relation to debt, the key thing homeowners need is an appraisal to calculate their Loan to Value Ratio – which influences various elements of a person’s debt position.
We’ve put together three reasons why an appraisal now might be very valuable time spent (it only takes 15 minutes!)
- Review your LVR position, and thus potentially reduce your interest rate.
After a period, the loan-to-value ratio (LVR) on a property decreases as mortgage repayments are made and the value of the property increase. You need to know the value of the property in order to capitalise on this. What are you capitalising on? A lower interest rate. Interest rates are tiered to the LVR, as it is reflective of the bank’s risk for a loan. The higher the LVR, the higher the interest rate. However, banks are not one to give out discounts freely and you must be proactive to review your current loan products and where your property is sitting in the market.
- Release equity in your property – if the value of your home goes up, you can release the equity in your property and claim it on debt (up to a certain LVR, without incurring fees). If you have enough equity, this allows you to secure more debt against the property. You can use this debt for a range of purposes, including, adding to your property portfolio, or cashing out to perform renovations.
- An appraisal can also be beneficial when you’re renting out your property as an investment. This gives you an idea of what is fair market value, and what you can be charging as a lessor.
Ultimately, it’s important to always know the value of your property as it allows you to capitalise on it and make smarter, more informed financial and investment decisions.