Using equity to buy an investment property

‍Get a current market valuation for your property

You need this value to help calculate your equity. These valuations, undertaken by independent assessors, are a necessary requirement by lenders in establishing the available equity in a property and your potential borrowing power.

‍

Determine your current loan amount owing on the property (if any).

You also need this amount to help calculate your equity. Again, whether its a new lender or your current finance provider, they'll need a clear picture on just how much that maybe owing on the property you are looking to use for equity purposes.

Work out your equity

Once you have determined the value of your property and how much is owing, you can then establish the equity, plus a potential the lending amount. Essentially, this is your property’s current market value less any money you owe on it, with most lenders offering to fund up to 80% of the equity amount.

Work out your potential borrowing power

1. Lenders will usually be prepared to lend up to the 80% of the equity you have in any existing property. For example, if you have $250,000 of equity, you can borrow up to 80% of that amount (i.e. $200,000).

2. Lenders will usually be prepared to lend up to 80% of the value of your investment property. This means that you will need to come up with a 20% deposit for it. For example, if you buy a $750,000 investment property, you will need to come up with a deposit of at least $150,000 (i.e. 20% of $750,000).