Using your Equity to Finance
Have you been paying the mortgage on your home for years now and are looking forward to finishing your mortgage and purchase an investment property? Through MCCA you may be eligible to purchase a second property using your current home equity.
What is home equity?
Home equity is the difference between your current home market value and the amount remaining on your home finance arrangement. That means if you have owned your home for a few years and the general property value is on the increase, there could be a chance that you’re sitting on a large asset base without you realizing.
For example if the current market value of your home is $500,000 and the finance amount remaining is $250,000, then your home equity will equal to $250,000.
How could you use your home equity to purchase an investment property?
Say you were looking at spending $450,000 on an investment property and there are additional costs (legal fees, stamp duty, application fee) involved in purchasing worth $30,000. The total amount you would need to finance is $480,000. To avoid having to pay Lenders Mortgage Insurance (LMI) you would have to finance a maximum of 80% of that property which is $384,000, leaving $96,000 for your deposit and costs that you would need to pay for. Depending on you meeting the finance requirements and criteria, you may be able to use your $250,000 of equity in your current property to cover the $96,000 cost.
Contact us to help you work out how much equity you may have in your property and whether your income would be able to service purchasing an investment property.