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Many homeowners wishing to expand their property portfolio by venturing into investment property could be sitting on pots of gold when it comes to the amount of home equity which they could release and fund a purchase of another property for income generation.
Several banks and building societies in Zimbabwe do offer a mortgage product called “Equity Release” which could be put to good use by homeowners considering purchasing an investment property as one of their financial goals. Through the Equity release facility homeowners can cash out up to 50% of the value of their existing property and use it to fund the purchase of a smaller or unitized investment property such as a cluster homes or flats and apartments to rent out and earn an income.
How does it Work?
The Equity release facility allows borrowers to unlock value out of their paid up unencumbered property, it enables homeowners with fully paid for residential property to apply for a loan leveraged against the value of that property. The loan may be used for investment purposes and other related business ventures.
Homeowners can borrow funds up to the 50% of the value of their owned property which is privately owned (i.e. the property with Title Deeds) for a period of upto 15 years.
This gives one access to the money locked up in their property to finance virtually anything without the need to sell their house. Equity Release allows one unrestricted use of funds as long as it is legal and this includes the purchase of an investment property to earn income.
How to Build Equity
Reduce your debt – building equity is about increasing the gap between what you owe and the value of your home.
More Things to Consider
Even if you have significant equity, it is not always guaranteed that you can borrow against it. Much like applying for a home loan, lenders will also consider several factors such as income, age, dependents, and any additional debts.
The equity release facility is perfectly designed for homeowners who have paid off their entire home loan to have access to the money locked up in their property to finance virtually anything without the need to sell their house.
