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Unlocking your home equity to purchase an investment property

Oktay Sengoz

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22/07/2024

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1.5 min read

Using the equity in your own home to buy an investment property is a smart way to leverage your existing assets. Most homeowners take advantage of their equity in their current property to grow their wealth. This is the best and easiest way purchase an investment property without having to save deposit.

Here’s a simple guide to get you started:

Understand and calculate your usable equity

Home equity is the difference between your property's market value and the remaining balance on your mortgage. Lenders usually allow you to borrow up to 80% of your home's value, minus your current mortgage. For example, if your home is worth $800,000 and you owe $400,000, you have $400,000 in equity. 80% of $800,000 is $640,000. Subtract the $400,000 mortgage, and you have $240,000 of usable equity.

Speak to us and get a pre-approval

Talk to us to understand your borrowing capacity and find the best loan options. A broker can assist in assessing your financial situation and guide you through the pre-approval process. Pre-approval involves submitting financial documents and undergoing a credit check, giving you a clear idea of how much you can borrow. We will also run a cashflow to see what the out of pocket expenses are and if you can manage them without impacting your current lifestyle.

Engage a buyers agent

A buyer's agent acts exclusively on behalf of the buyer, providing expert guidance throughout the process. They have in-depth market knowledge, access to offmarket listings, and strong negotiation skills, which can result in better deals and terms. Buyer’s agents save time by filtering out unsuitable properties and arranging viewings. Additionally, their expertise can help buyers avoid costly mistakes and make informed decisions, ultimately securing the best possible property that fits their needs and budget.

Using your home equity to buy an investment property can be a powerful wealth-building strategy.

Consult with us today to make informed decisions and optimise your financial future.

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