Using Equity for Investment Properties

One of the biggest questions we always get asked, is can I use equity in my home to purchase an investment property? The answer just could be yes!

Many people will use their existing home to purchase an investment property without utilising their savings. Using the equity in your current home is a clever way to build your property portfolio and invest in the property market sooner.

So, what is equity anyway? Equity is the difference between the current market value of your home and the outstanding balance left owing on your loan. How much equity you can use will vary between lenders, however, many lenders will allow you to use up to 90% of your property value. Therefore, the usable equity available would be based on your property value at 90%, minus your outstanding loan balance. Note, if you borrow greater than 80% of your property value, you could be subject to a Lenders Mortgage Insurance Premium (LMI).

What are the benefits of using equity?

There are many benefits from using equity to purchase another property, including:

  • Not dipping into your savings for a deposit
  • Lock in a low competitive interest rate
  • Allows you to enter the property market and build your portfolio sooner
  • Avoid paying Lenders Mortgage Insurance (LMI)

Reviewing your options

If you’re thinking of purchasing an investment property with the equity in your current home, it may also be a great time to review your current home loans as well. At this point, it is a great opportunity to assess your current interest rate, fees and features available. You may find you could obtain a better deal from another lender within the market and purchase an investment property using your equity at the same time.

Ultimately, purchasing an investment property using the equity available in your current home is an excellent way to build your property portfolio and get into the investment market sooner. If you chose to refinance your current home loan at the same time, you could potentially save yourself thousands in interest over the life of your loan while paying down the balance owing, and subsequently building more equity to purchase more properties again in the future.

Find out how to get started today by touching base with one of our expert Mortgage and Finance Brokers!

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Expert Tips