You might have heard from many people that real estate investment gives a good returns. But the major hurdle that they are facing is – Finance. If you don’t have a huge money on hand then how would you buy the property you want? You have some investment properties in your knowledge, you want to buy it but managing finance is tough task for you.
Then the good news is you can unlock your home equity to buy the new one. Yes, today in this blog post we are going to reveal the secret how you can use your home’s equity to purchase your next investment property.
Before all you need to understand the equity –
Equity is the difference between the asset value and the current loans you have. The more larger the gap, the greater the equity. It is your power to borrow, the amount of money you have in your home or investment property that you can use to purchase further other properties. As the home prices rises the home equity will rise too.
Say for your house value is $5,00,000 and current loan is $2,00,000 then equity will be $3,00,000.
Melbourne property valuer says – Surely the advantages are there when one uses the current home’s equity to purchase the next one, but you cannot ignore the risk associated with it.
The major benefit is the cost of borrowing on home equity loan is lower as compared with the other one. The idea of utilising your home’s equity will leads to increase your monthly mortgage payments. Also the risk of losing your primary home to foreclosure will be increased.
Buying second home means involving huge amount of money in same sector it’s like putting your all eggs in a single basket of real estate market. Which is not right with the financial point of view. But one cannot ignore the alluring profits associated with the real estate property market.
Here are the steps to use home equity to purchase your next home or any real estate property
Say your current home value is $5,00,000 the bank will lend money on the 80% of your home value.
Current property value * 80% = borrowed equity.
$ 5,00,000 * 80% = $ 4,00,000
Then the $4,00,000l the money you will get from bank as a loan and you had other loan of $2,00,000 you can repay that previous loan from the borrowed equity then the $2,00,000 equity left in your hand.
With this you can buy a new property for investment purpose to keep your future secured on financial grounds, also you can use this in existing property renovation. It vital to structure down your investment loan accurately and separately thus you can enjoy the benefits of tax deductible loan.
If you need property valuation services then hire an expert property valuer, who can guide you well in property matters.