Yes, equity is a powerful tool that can set you on the road to building a profitable investment property portfolio.
You can use the equity in your home as an investment property deposit and if you have enough equity built up, you can borrow 80% of the property’s value without having to use your own cash.
How equity is calculated
Your accessible equity is the difference between your home’s current value and how much you still owe on your home loan.
If you’ve lived in your home for five years or more, you’ve probably accumulated quite a bit of accessible equity.
But lenders will only lend up to 80% of your home’s current value minus your current mortgage. This is known as your useable equity, which is quite a bit less than your accessible equity.
But it can still be a significant amount for an investment property deposit or any other use you may have for it, such as renovating your home, investing in shares or managed funds or improving your lifestyle with a holiday or new car.
Tips when buying an investment property
- All investments carry some level of risk, so to reduce your exposure when accessing your equity;
- You could keep some of your equity for emergencies, instead of using it all to invest in property.
- Consider repaying your home loan as quickly as you can.
- Think about learning more about property investing so you can make educated choices.
- It's always important to get professional financial advice to fully understand your options.