How to use equity to buy an investment property
1. Calculate Your Usable Equity
Your equity is the difference between your property’s current value and the outstanding home loan.
Formula:
Usable Equity = (Property Value × 0.80) − Existing Loan Balance
Lenders typically allow borrowing up to 80% of the property value without LMI costs.
Example:
- Property value: $800,000
- Mortgage balance: $300,000
- 80% of $800,000 = $640,000
- Usable equity: $640,000 − $300,000 = $340,000
2. Speak with Mortelligence.com.au
We can help you:
- Understand your borrowing capacity
- Compare lenders for competitive interest rates
- Structure the investment loan for tax efficiency
3. Access the Equity via a Loan Product
You can access equity by:
- Top-up loan: Increase your existing mortgage to release funds
4. Use Equity for Deposit & Costs
Equity can cover:
- Deposit for the investment property
- Stamp duty, legal fees, and other associated costs
5. Get Pre-Approval
We will help you get pre-approval so you can confidently go shopping for your next investment property.
6. Purchase the Investment Property
Use the released equity to secure your investment property and manage loan repayments based on rental income and other financial strategies.
Key Considerations
- Pre-approvals can normally last up to 6 months
- Ensure you maintain a strong buffer for unexpected expenses
- Keep investment and personal loans separate for better tax tracking
- Interest on the investment loan is generally tax-deductible, speak with your Accountant for tax advice.