If you’re keen to grow your wealth through an investment property unlocking the equity in your home could be the answer.
Like many Australians, you might see your mortgage as just a series of long term monthly payments with the end goal being to own your home.
In today’s property climate, with property values rising, your mortgage payments have also been adding to the amount of equity you have in your home.
What is equity? In simple terms it is the value of your property less the amount you owe the bank.
For example, if you have a $900,000 home with a $400,000 mortgage you have $500,000 equity.

Access the equity in your home
The great news is that your lender will probably allow you to access the equity you have in your home for a variety of financial reasons.
The options for what you can do with your equity are unlimited. You might want to go on a holiday, buy a new car, renovate your home or buy an investment property.

Choose to invest in assets, not luxury lifestyle
If you choose to access your equity, we recommend you approach the decision with discipline and smarts. Over the years we’ve seen friends who’ve owned great real estate end up with nothing because they love going on overseas trips and driving expensive cars!
Using your equity to pay for holiday or a car is more affordable than a personal loan.
Using equity to renovate your home is a great idea, because it increases the value of your property.
The best move financially is to buy an investment property. Just as your home has grown in capital value, so will your investment property, which can also provide a solid rental return to assist with paying the mortgage. Using your equity to purchase an investment property can achieve great returns for you, provided it’s done right.

The benefits of using your equity as a deposit
The best use of your equity is as a deposit for an investment property. For one thing, it speeds up the purchase by eliminating the time required to save a deposit.
Buying a property with less than 20% deposit attracts thousands of unnecessary dollars in lenders mortgage insurance. This can be avoided if the value of your mortgages is less than 80% of the value of your home/equity providing property and the new investment property combined.
For example, if your home is worth $900,000 with a $400,000 mortgage you have equity of $500,000.
An investment property worth $750,000 requires a $150,000 deposit to avoid lenders mortgage insurance.
If you use $150,000 equity from your home as a deposit on the investment property you still have $250,000 surplus equity in your home and have therefore avoided lenders mortgage insurance.
And finally with this approach you have full negative gearing benefits on your investment property and the mortgage payments on your home loan do not change.

How to access your equity
Over the last ten years the property market has grown faster than most buyers can borrow.
As a family with a mortgage, school fees and the rising cost of living it would take five to ten years to save $150,000 for a 20% deposit on a $750,000 property purchase.
If you opt to use your equity to invest in a property, your lender assesses your equity, and your family’s circumstances along with other financial commitments to understand your ability to service a loan. As with any loan application banks are cautious and you still need to prove you are capable of repaying the loan.

Choose the investment property carefully
For this to become an effective wealth creation method we are able to provide advice on the best property to buy – one that will grow in capital value year after year. Read our post from 2016 with some tips about buying the best investment property.

We can help you purchase an investment property with your equity
If you own your own home, have equity of $300,000 or more and are interested in finding out more about how you can accelerate your wealth creation through property investment in established real estate give us a call today.

We’ll tell you our story about how we have done it, and how we can help you do it too.

Independent Property Brokers. Where smart buyers come to buy.

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If you would like to engage us to buy a home, an investment or to manage a property,
or learn more about our services, we’re ready to hear from you.

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