5 steps to accessing your home’s equity to buy an investment property

Better Loan Solutions in Mornington Peninsula • Learning Centre • Insights

5 steps to accessing your home’s equity to buy an investment property.

If you’ve owned your home for several years, chances are you’ve built up equity, and that equity could be the key to funding your next property investment. Instead of saving a separate deposit from scratch, many buyers use the equity in their home to get into the market sooner. Here's how it works:

Estimate your property’s current value

Start by finding out how much your property is worth today. This can be done through comparable recent sales, a professional valuation, or a free property report from your mortgage broker. Understanding the market value is the first step in calculating your usable equity.

Work out your accessible equity

Your equity is the difference between your home’s current value and the balance remaining on your mortgage. However, lenders typically allow you to access up to 80% of your home’s value, minus your current loan. This is your “accessible equity.” Borrowing above this threshold may trigger Lender’s Mortgage Insurance (LMI), even if you’ve paid it before.

Assess your borrowing capacity

Accessible equity is just part of the equation. You’ll need to prove you can afford the higher repayments on a larger loan. A mortgage broker can help you crunch the numbers and understand how much you can comfortably borrow without putting strain on your finances.

Review your loan options and consider refinancing

This is a great time to explore your mortgage options. You may need to refinance your current loan or take out an investment loan. Keep in mind that investment loans typically have higher interest rates, but the interest (and some property costs) may be tax deductible. Your broker can help you compare loan features, interest rates and any switching costs.

Apply and settle on your investment property

Once you’ve crunched the numbers, selected a suitable loan, and found the right property, your broker will help lodge the application and manage the process through to settlement. They’ll guide you through all the paperwork, lender requirements, and negotiations, so you can focus on finding the right investment.

Did you know?

With our in-house mortgage broking division we bridge the gap between the countless phone calls and emails between lender and accountant making your refinancing and borrowing much less stressful.

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Investing in property?

Understanding the market value is the first step in calculating your usable equity. This can be done through comparable recent sales, a professional valuation, or a free property report from your mortgage broker.

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