5 Steps to Accessing Your Home’s Equity to Buy an Investment Property
If you’ve owned your home for several years, chances are you’ve built up equity, and that equity could be the key to funding your next property investment. Instead of saving a separate deposit from scratch, many buyers use the equity in their home to get into the market sooner. Here’s how it works:
Estimate your property’s current value
Start by finding out how much your property is worth today. This can be done through comparable recent sales, a professional valuation, or a free property report from us. Understanding the market value is the first step in calculating your usable equity.
Work out your accessible equity
Your equity is the difference between your home’s current value and the balance remaining on your mortgage. However, lenders typically allow you to access up to 80% of your home’s value, minus your current loan. This is your “accessible equity.” Borrowing above this threshold may trigger Lender’s Mortgage Insurance (LMI), even if you’ve paid it before.
Assess your borrowing capacity
Accessible equity is just part of the equation. You’ll need to prove you can afford the higher repayments on a larger loan. As your mortgage broker, we can help you crunch the numbers and understand how much you can comfortably borrow without putting strain on your finances.
Review your loan options and consider refinancing
This is a great time to explore your mortgage options. You may need to refinance your current loan or take out an investment loan. Keep in mind that investment loans typically have higher interest rates, but the interest (and some property costs) may be tax deductible (seek professional guidance for your individual circumstances). As your trusted broker, we can help you compare loan features, interest rates and any switching costs.
Apply and settle on your investment property
Once we’ve crunched the numbers then you select a suitable loan for pre-approval, and then you can go hunting from the right property. Our favourite thing to do is to guide you through all the paperwork, lender requirements, and lending negotiations, so you can focus on finding the right investment.
We do this with many of our clients, so contact us to discuss your situation and financial goals further.
*This information is general in nature and does not take into consideration your individual circumstances. Please contact us for further information.
