If you’ve owned your home for a number of years you most likely have gained home equity – that’s the difference between the property’s market value and the balance of your home loan. What this means to you is there’s a whole stash of cash just waiting to be tapped into either through a home loan refinance or a loan top up.

Smart moves

Invest in a rental property – Using your home to grow wealth? Now that’s a smart move. Tapping into equity may even mean you don’t need to save for a cash deposit. For an investment property buyers are better off buying a well-located apartment due to strong price growth in sought-after areas.Generally speaking, if you can afford an apartment in a better location than a house, it’s definitely worth considering.

Properties closer to the city centre cost more because proximity to high-income employment is a key factor.

People also prefer the proximity to food varieties, entertainment and less valuable hours wasted in traffic.

Apartments are often concentrated in inner-ring suburbs, near train lines or close to shopping hubs, while outer suburbs are more likely to have houses within first-home buyer budgets.

Houses also have higher council rates and insurance, and cost more to heat and cool.All other things being equal, a house will bring in more rental income than an equivalent apartment. But possibly not as much as the extra purchasing cost, given that houses sell at much higher prices. If you're looking to maximise rental income while minimising expenses then an apartment might be a better fit.

Sensible – with strings attached

Consolidating personal debt – If you’re juggling a few credit cards, a personal loan and maybe a car loan, consolidating the lot into your home loan can streamline your finances. It means just one monthly repayment to manage, and as home loans usually have a lower rate, you’ll save on interest costs.But – and it’s a big but – you could be turning short term debts into a long term debt and end up paying more than necessary in long term interest. Use the savings on monthly repayments to make extra home loan repayments and keep a lid on interest costs while you whittle away the loan.

Think twice

Here today, gone tomorrow purchases – using home equity to fund a round the world vacation, a new designer wardrobe, or any purchase with no real lasting value calls for some serious soul searching. Not only will you be whittling away precious equity, you are adding the cost of long term interest to the purchases.  The time may come when you really need that equity for must-haves rather than luxuries. So think twice and weigh up other finance options like, say, a personal loan, which will allow you to pay off big ticket purchases buys in just a few years.