Buying An Investment Property With Equity

Buying An Investment Property With Equity – Equity gives you leverage, allowing you to use the current value of your home as a down payment for an investment property. Here is the way.

If you already own a property, you can use your home equity – the value of the property you own outright, or the part of your home loan you’ve paid off – to make a deposit.

Buying An Investment Property With Equity

Buying An Investment Property With Equity

Of course, there are many things to consider when buying an investment property, so make sure you understand the risks and do your research to find out if the property is the right investment for you.

What Is Home Equity & How Can You Use It?

Simply put, equity is the value of your current assets, minus the balance on your mortgage. That’s different than usable equity, which is exactly what you need if you plan to use your equity to secure an investment home loan.

While your home may be worth $500,000, for example, your usable equity—that is, the equity you have access to and put toward your investment—may only be $250,000 because you still have $150,000 to pay. your home loan.

This is because lenders generally won’t let you borrow more than 80% of the property’s value. Therefore, you need to factor in 80% when calculating usable equity.

To calculate usable equity, we take the market value of the property ($500,000 in this example), multiply it by 0.8 (80% of the maximum that lenders will allow you to borrow) and subtract the remaining balance on the mortgage ($150,000 for this course) ).

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So your usable equity is $250,000, which is more than enough for a big down payment on your first investment property (unless you have multi-millionaire tastes).

As you continue to pay off your mortgage, the amount of equity (and net worth) you have will increase.

But equity also depends on market value. Therefore, the value of your property can increase (or decrease) depending on several factors, such as:

Buying An Investment Property With Equity

In order to find out whether the value of your property has increased or decreased, you will of course need to obtain a property valuation, either from a bank or other authorized provider.

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When you apply for an investment loan, your lender will usually ask you for a recent appraisal or provide one for you.

That brings us to choose investment loans with interest rates and features that suit you.

You’ll have a variety of loans to choose from when shopping for your investment property, so understanding what each one offers is important to making the right decision for you.

Interest only (IO) loans are popular among real estate investors, where monthly payments are made solely from the interest on the loan, rather than principal and interest (P&I), where the principal is the total amount of the loan.

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Although the low monthly payments are attractive, you need to keep in mind that in the long run, you may end up paying more than if you had gone with the P&I home loan from the start.

Athena real estate loans offer competitive rates for real estate investors, allowing you to use your equity to lower your loan interest rate. Borrow from $100,000 to $2 million at 5.59% p.a. (5.59% p.a. comparison rate*) for LVR <50%, or 5.69% p.a. (5.71% p.a. comparison rate*) with LVR between 70-80%.

Variable rate loans generally offer customers lower interest rates than fixed rate products, however they are more exposed to interest rate increases.

Buying An Investment Property With Equity

Despite the pros and cons, you generally have a wide variety of options when it comes to variable rate loans.

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Suncorp’s Back to Basics Home Loan is available to investors looking to borrow more than $150,000, with a minimum deposit of 10%. This loan carries 6.08% p.a. variable interest rate (comparison rate 6.09%*) for LVR below 60% and flexible payment options.

Currently, lenders can get up to $3,000 in cash back on their loans between $500,000 and $1 million, as long as they lend 90 percent or less of the property’s value. Terms and conditions apply and this offer is only open to new applicants who apply by 30 June 2023 and settle by 28 September 2023.

Fixed rate mortgages are not subject to rising interest rates as they are locked in for a set period of time. However, you need to consider the repayment rate you will be subject to once the fixed term has passed, as it may be higher than before (this is when you might consider refinancing your home loan).

One of the biggest selling points of fixed rate investment loans is that it’s easy to budget for your repayments, thanks to the consistency of the rate.

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There are also other types of interest rates to choose from, such as variable rate loans, which should be considered.

In the meantime, you can start comparing investment loans by looking at some of the products below, or by heading over to Australia’s best home loans for investors, as featured in the 2023 Experts Choice Home Loan Awards.

As a financial writer, Jack’s goal is to cut through the jargon and give people the information they need to make better, more informed financial decisions. With a background in communications and journalism, she brings her creative language skills to make the world of insurance and money management fun and educational.

Buying An Investment Property With Equity

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Considerations When Buying Investment Property

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In recent years, the popularity of real estate investments has increased tremendously. Using equity to buy an investment property has become a very popular method among homeowners. This approach allows them to leverage their existing assets to find rental properties and maximize their profitability. In this blog post, we’ll explore the process of getting into your equity, choosing the right lender and equity product, and choosing the right rental property.

The YVR Remo Show is here to guide you through the process of using your existing property to purchase a rental property and maximize your return on investment. In this episode, we discuss the strategies and processes involved in accessing your equity, choosing the right lender and equity product, and choosing the right rental property. Watch the full episode or read on for an overview of how you can use your equity to invest in real estate.

Buying An Investment Property With Equity

Real estate investments can provide long-term benefits and steady cash flow. Appreciation and real estate gains can lead to significant returns compared to traditional investments like GICs. In addition, real estate can be a valuable asset for those without traditional pensions, providing a solid income stream in retirement.

Infographic] How To Buy Discounted Investment Property

Home equity refers to the difference between the market value of your home and your outstanding mortgage. To use equity in your home, you need access to equity in your home, such as getting a mortgage. Generally, you can borrow up to 80% of the home’s value. One popular option for accessing your home equity is a line of credit (HELOC), which provides quick access to funds.

These loans include a portion of a conventional loan and a line of credit, which allows you to use a line of credit to purchase a rental property and convert the balance into a fixed term. Working with a real estate agent can help you look at multiple scenarios and choose the best financing option for your needs.

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