Putting together a deposit is often the hardest part about buying a property. Fortunately, those who have already bought their first home have a number of financing options to further grow their portfolio. Equity is one of the most valuable allies for investors when it comes to building wealth.
With equity, you can leverage the profits from one property to finance another. While it can be a risky strategy, many investors have adopted this approach. This is where professional advice is essential. Leveraging often helps you to enter the investment market years before you otherwise could have.
What is Equity?
Equity is the difference between the market value of your property and how much you have left on your mortgage.
For example, if your home is worth $400,000 and you have $200,000 left on the mortgage, you have $200,000 in equity. You can borrow against this equity to purchase an investment property, with the equity used as security.
Remember that calculating your equity involves the current value of your property, which will differ from its purchase price. You can build more equity by paying off your mortgage quicker or increasing the value of your home through renovations. You can also leverage the equity in several properties if you own more than one.
How to Use Equity
Ensure you get an independent valuation of your property to get an accurate equity calculation. Work with a specialist mortgage broker who understands investing, equity, and negative gearing. They can help you organise the ideal financial structure your investment.
As an investor, you can access up to 80% of your home equity without needing to take out a low equity premium. Using the example above, you could access $160,000 if you have $200,000 in equity. Some mortgage brokers, like iLender, offer loans of up to 90%.
If you’re interested in using equity for property investment, talk to iLender’s team of expert mortgage brokers. We can guide you through the process and provide advice on investment strategies and the property market.
Call us today on 0800 LENDER (0800-536-337) or contact us online to see how we can help you with your property investment goals.
