Wealth strategist Todd Polke explains how homeowners can borrow against home equity to fund property investments. Australian lenders typically allow borrowing up to 80-90% of a property's value, which can unlock $100-$150k for further investment. The key is pairing borrowed money with rental income or other cash flow to cover repayments and avoid over-leveraging.
Imagine this. You are sitting on a gold mine, but you don't even know it. Your home could be worth far more than you think, and that untapped potential could be the key to unlocking a wealth-building strategy that literally changes everything. But here's the kicker. Most people don't fully understand how to leverage their hidden value, and it's costing them every single day. Hi, I'm Todd Polke, a wealth strategist and investment coach who has helped thousands of people build multimillion-dollar investment portfolios and create true financial freedom. Today, what we're going to be talking about is literally one of the most powerful tools in property investing— equity. Now, you've probably heard the term before, but when it comes to equity, there are a lot of questions and even more fears. Can I afford to borrow against my home? What happens if the market drops? Is it really worth it to do it in the first place? And aren't I actually supposed to pay off my home? Why would I be drawing more equity out? Now I get it. It's easy to get caught up in all the what-ifs, but once you truly understand how equity actually works, and how to use it the right way, you'll see that it's not about taking risks. It's about making strategic moves that work for you. Now, before we get into these fears, let's clarify what equity actually is. Simply put, equity is the difference between what your property is worth and how much you owe on your mortgage. Really simple math. For example, if your home is valued at $500,000 $500,000 and you still owe $300,000 on it, you do the math on that, then your equity is sitting at $200,000. But here's the thing, your equity is not a cash asset that you can instantly access. The bank will only let you borrow against a portion of it. So what does this actually look like? Usually the banks in Australia will lend you between 80% to 90% of your property's values and that will change depending on which country you're in but in Australia, it's between 80% to 90%. So in this case, if your house is worth $500,000, the bank might lend you up to $400,000 at 80% or up to $450,000 at 90%. Take out the debt of $300,000 and you're left with potential cash in your hand of between $100,000 to $150,000 to begin growing your portfolio. And yes, you can take that out in cash depending on the lender. Now, this is where it gets really interesting because once you understand how equity works, you can then use it to invest in more properties or more assets to build your wealth and create long-term financial freedom. It can honestly be one of your greatest leveraging points. Now, of course, when it comes to leveraging equity, fear is a major roadblock. I've met countless people who are simply too afraid to take that first step, yet they're sitting on a goldmine. They could be so much further than where they are right now. It feels confusing. Can be overwhelming and I totally get it. The good news is though, is that once you gain a clear understanding how equity works, most of those fears will disappear or at least you can manage them. Now, let's take a moment to dig into what's really holding you back. Now, if you've got a specific question or concern around any of this, make sure you drop it in the comments and I'll try and get back to you on this because I know there's always a lot of questions that come up with this. But right now, I'm going to dive into some of the most common fears and questions I hear from clients time and time again that I've literally heard over the last 2 decades coaching investors how to build multimillion-dollar property portfolios. Question number 1, and this is a big one a lot of people ask, what if I can't afford the repayments? I get it, it's a big one. The fear of taking on too much debt. Now, we're taught all the way through our life that you should just pay off your debt and that's what we're taught, the game we're supposed to play but there's another game that the wealthy play but if you If you don't know how to use your equity, the debt can feel like a heavy burden, especially if you're borrowing more money against your home. But here's the key. It's not just about borrowing, it's about having a solid strategy in place of what you're going to do with that equity once you take it. So we don't just take equity out just for the sake of it, right? You need a plan on how to generate returns that will help cover the repayments, but not just that, that you can then deploy to help you be able to grow your wealth. So for example, if you borrow $100,000 against your equity to buy an investment property, you should make sure that the rent you receive from that property will cover at least a good chunk of the repayments and then have a plan on how to neutralize the rest. When you're strategic, your debt becomes manageable. It can even work for you. Now, when I'm talking about this and we're making sure that you use that equity to cover the rest, I like to build wealth systems. And when I talk about building wealth systems, what I'm really talking about is, well, okay, we might buy a property and there's a negative cash flow associated to that for sure. But if we can then use that equity to go build some other income streams, we pigeon pair these 2 together and it creates your very own wealth system that not only neutralises the cash flow in your portfolio, but helps you continue accumulating asset on the way to creating financial freedom. Question number 2, what if I use too much equity and I can't actually pay it back? Now, this is a valid concern, especially when you're just starting out. The thing to remember here is to never over-leverage yourself without a plan to pay it back. You should never take out more equity than you can comfortably service based on your current income and your future plans of what you're going to do with that equity to grow your wealth and grow your income streams. That's why it's essential to work with a financial expert who can help you not only assess how much equity you can safely access, but how to create a strategic plan to cover the costs and then pay it back. And let me tell you, paying principal interest over 30-odd years is not the most effective way. That is just you working for the bank and you're never gonna win the game of wealth working for the bank, that's for sure. A well-structured investment strategy will ensure you've got all of your bases covered and you don't end up trying to build wealth While trying to live on baked beans and rice. Now, I've been there, I've done that, and it sucks, and I don't want that for any of you. Our wealth-building plan is designed to improve the quality of our life, not take away from it. Question number 3, can I really afford to borrow against my home? This question often comes up when people are unsure about their financial stability. It's a great question, but the answer is it depends on your situation. Borrowing against your own home should only be done if you have a clear plan to create returns, whether through rental income, capital gains, or even business profits. If you've been consistently building up your income and your savings and you have a clear path forward, borrowing against your equity is just a tool to help you take the next step in your wealth-building journey. But doing that without knowing your numbers and potential consequences is just gambling, and investors don't gamble. We make decisions based on facts, figures, and due diligence. If you found this video helpful, be sure to hit the like button and subscribe to access more content just like this. And if you want to know how millionaire property investors structure their lending, make sure you check out the next video. Thanks for tuning in and remember, the more you understand your equity, the more power you'll have to make it work for you.
