Starting a development project can be an excellent way to leverage your assets into a profitable venture. However, one of the first hurdles many face is financing the initial stages of development. One effective strategy is releasing equity from existing properties.
Understanding Equity Release
Equity is the value of ownership in your property, calculated by subtracting any outstanding mortgage or loans against the property from its current market value. Releasing equity involves borrowing against this value to fund other investments or projects, such as property development. Most property development projects require a minimum equity amount to allow you to start. This can differ depending on the lender you are using, but a general rule of thumb is to aim for 30%.
The Process
- Valuation: The first step is to get a current valuation of your property to understand how much equity you might be able to release.
- Consultation: Speak with financial advisors or a team like ConstructionLoans.co.nz to discuss your options and what releasing equity could mean for your financial situation.
- Application: You'll then apply for a new loan or refinancing option based on this equity. The specifics will depend on your lender's products and your financial profile.
Benefits and Considerations
Releasing equity can provide the necessary capital to start your development project without needing to sell assets. However, it's important to consider the implications, such as increased debt and potential changes in mortgage payments.
Our team can help you navigate the equity release process, from understanding your borrowing capacity based on your equity to choosing the right financing option for your needs. We aim to make the financing step of your development project as seamless as possible. Reach out to us at www.constructionloans.co.nz, or at 0800 100 300.
