Using the equity in your home to purchase an investment property



If you are already repaying your own home or another investment property, you may be able to use the equity you have built up to purchase an additional property. Let’s use an example to explain this process. Your lender is going to require that the loan amount is less than 80% of the value of the property unless you want to pay lender’s mortgage insurance (LMI), so to keep things simple we will assume that you can only borrow 80%. From our example on the right, you have $250,000 sitting in your home loan that could be used to purchase an investment property. You have two different options available in terms of structuring your loans:

1 Establish a line of credit, or

2 Apply for a standard term loan with a redraw facility or an offset account where the remaining equity will be invested until required.

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