Access Your Equity to Invest
Are you watching others around you build their property portfolios and wondering how to buy your own investment property without blowing all your savings? If you own a home, you could harness the power of your home equity to get a kick start.
Put simply, equity is the difference between the value of your home and how much you owe the bank against it. So if your home is worth $400,000 and you owe $220,000, you have $180,000 in equity.
The great thing about equity is that you can use it as security with the bank and borrow against it:
to extend your home
to buy a car
to go on a holiday, or
for any use the bank allows.
Most importantly, you can use the equity in your home to buy an investment property.
However, it’s important to be aware you can’t use all of your available equity. Since the bank is lending you money against the value of your home, they won’t lend you the full amount. You see, if house prices dip, they don’t want to have a security that is worth less than a customer owes.
Typically, banks will lend you 80% of the value of your home, minus the debt you still owe against it. However, it is possible to borrow more than 80% by taking out Lenders Mortgage Insurance (LMI).