How to use home equity to buy investment property

The first question you’re asking is what is equity? Equity is the difference between the current market value of your home Minus the remaining amount on your loan. Equity can be used to buy a home or an investment property without having to save for a deposit.

How to calculate total Equity –

For example, if your house is worth $500,000 and you still owe $200,000 your total equity is $300,000. Keep in mind that the equity is reliant on the market value of your home and not what you bought the property for. As the market fluctuates so will your equity. To get an accurate read on the market value of your home using a property valuation through a bank, real estate agent or professional valuer will give an accurate value. Banks will generally lend up to 80% so we would recommend when calculating usable equity that you only use 80% of the market value and not the complete total.

Once the total equity has been calculated and a final value has been arrived at, you can then discuss with your bank or financial lender how to use the equity to finance your next home or investment property. Your current property will become security against the new debt.

If you are interested in this option or you have any questions on how to implement this strategy please give Chris a call on 0434 449 455.