If you have been paying off your mortgage for a few years, you will most likely have built up some equity in your property. Your equity is probably your family's greatest asset. Refinancing is a common strategy to be able to access the valuable equity in the home to be able to fund renovations, an investment property, or achieve other goals that you have.
As a percentage:
You can do this by:
The equation (using the above figures) looks like this:
Accessing Equity by Refinancing
In the above example – You have $350,000 (38.89%) equity in your property. To avoid lenders mortgage insurance (LMI), in most cases, you can only lend up to 80% of the home's value.
Obviously, it is beneficial to build up your home equity. Building equity is one of the primary financial benefits of homeownership. There are a few ways to you can build increased equity in your home:
Buying an investment property using your existing home equity is a very popular investment strategy. By establishing a split home loan (one for investment purposes) using the equity you have in your current home you can use this cash as a means to pay the 20% deposit and costs associated with buying an investment property. Different lenders will have different rules on this. So it is important to talk to New Property and Finance for a great home loan and for investment home advice.
New Property and Finance specialises in Building New Property and helping everyday Aussies get a home loan to buy them safely.
RISK MANAGEMENT: Using the equity of your own home to buy an investment property does carry some risks. If you don't use your equity wisely, you could end up losing your home, or worst-case scenario, you could lose both your home and your investment property. It is important that you speak to a New Property and Finance consultant to ensure that you are set up correctly to invest in property safely BEFORE you buy any property.
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The material on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this website is General in Nature and does not take into account any person's particular investment objectives, financial situation and particular needs. Before making an investment decision based on this general information you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this website are provided for illustrative purposes only. Although every effort has been made to verify the accuracy of the information contained on this website, New Property and Finance Pty Ltd, its officers, representatives, employees, and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.