Most Australians have untapped potential sitting beneath their feet. How can you take full advantage of your home and start building your future?
Whilst you may not have thought about buying an investment property, the equity you have in your home might make it possible.
What is equity?
We’re going to be using the word ‘equity’ a lot in this article, so in case you didn’t know: equity is the true value you hold as the owner of your home. This value is determined by finding the difference between your mortgage and your property's value. For example, if your home is worth $700,000 and you have a $200,000 mortgage, your equity is $500,000.
The property market has had a range of outcomes for Australian investors, with some experiencing positive returns over the years*. With the majority of properties increasing in value long-term, your home may be worth more than you think, and you might be in a prime position to capitalise on this.
* Property Investment can also involve financial risks and losses in some instances.
Rising property values increase home equity
Due to most properties increasing in value when held for a long enough period of time, this may mean many homeowners have built up enough equity to explore purchasing an investment.
If the value of your home has increased compared to the amount owing on your mortgage, there may be equity you can access. Depending on your financial circumstances, you could supercharge your financial future by borrowing from this equity to pay the deposit on an investment property.
Ideally, your available equity will be enough to provide a 20% deposit for the investment property you’ve got your eye on.
How does equity for an investment property work?
Imagine you bought a property for $500,000 five years ago, with a mortgage of $400,000—80% of the home’s value at that time. If your mortgage balance is now $380,000 and your home is currently valued at $600,000, you owe 63% of its current value.
Basically, you’ve been paying your loan off slowly and steadily while your property has been appreciating in value on its own. Your equity grows as you pay down your mortgage and as your property appreciates in value.
With the above numbers, you may be able to borrow a further $100,000 (taking your mortgage back up to 80% of your home’s value) and use these funds as the deposit for an investment.
Will I qualify?
Qualifying for additional lending does have its own barriers. But if your income has recently seen a rise or you weren’t too ambitious when you borrowed your home loan, it’s likely that our experts could help you secure a new home loan to help you take advantage of this new-found equity.
Starting the conversation with Bankvic
If you’re looking to purchase an investment property using your home equity, you should make an appointment with a BankVic lender.
We work with members to assess whether you have enough equity in your current property and whether you qualify for additional lending for another property. So all the hard work is on us!
Contact BankVic to chat about home loans by calling us on 13 63 73, or book a time with a mobile lending manager to find out how our investment lending products might meet your needs.
The information in this article is general in nature and does not take into account your objectives, financial situation, or needs. You should consider whether it is appropriate for you before acquiring a product or service. Property investments involve financial risks and tax implications, and you should consider your investment decisions carefully and if uncertain seek personal financial advice. Home Loan Variable interest rate is variable and is subject to change. Police Financial Services Limited ABN 33 087 651 661—trading as BankVic | AFSL and Australian Credit License 240293.
