A Simple Guide to Using Equity
When it comes to investment properties, many people assume this is a financial ambition out of reach. You feel pressed with existing commitments and believe it’s a distant goal, like once the children have left the nest. You might be surprised to learn that buying a second property isn’t as impossible as it sounds.
The main thing many don’t realise about investment property practice, is that you can use the equity in your current home as your deposit for your next property. And the best news is, unlike your home loan, two other parties help you pay off your new investment loan. Between tenants paying to live in your investment property, the tax man’s investment property deductions and having the correct loan structures, your investment property may only cost you $50 a week. Here’s how:
What is equity?
Equity in your home occurs when the amount you owe on your mortgage is less than what your home is worth in today’s housing market. To quickly calculate your equity, work out the current value of your property and deduct the amount left owing on your home loan. For example, if you believe that your property is currently worth $850,000 and your home loan balance is $450,000 then the equity in your home is $400,000.
How do property investors use equity?
Saving for something as substantial as a property deposit doesn’t happen quickly. And when you consider how quickly prices in the housing market can increase, you end up needing to save far more funds than originally anticipated. This is where your equity fast-tracks the process. You get to keep your cash reserves in your pocket, and buy your perfect investment property now, not 5-10 years down the track when you have accumulated the savings for it.
This strategy keeps working for you as your properties continue to increase in value, and you amass enough equity again to have a deposit to buy a third property and so forth, until you have a portfolio to take care of your financial future. Therefore, it’s also important to put time and research into each property purchase and not just buy the first property you like to rent out for an income stream.
What is the best way for equity to be accessed for the first time?
If you’ve been paying off your mortgage for a few years now, there’s a good chance you will have amassed a decent amount of equity in your home. You’ll need to have your house professionally valued to work out its current market worth before approaching a financial institution to see how much you can borrow. Once you know how much you can borrow, you can then start looking for properties in your price range that also fit your property growth strategy.
How Vision Property & Finance can help
It can sound like a daunting task, but with the right advice and assistance, the process of buying an investment property with your equity can be made easy. The highly-qualified team at Vision have experience and well understand the benefits and strategies of using equity to build portfolios for their clients.
So why wait another day to build your investment property portfolio? Call 1800 004 663 or contact us to discuss your current financial situation, and together we can help you determine your options relating to an investment property purchase and building a better future for you and your family.
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