How to use equity to buy an investment property.

Have you lived in your current home for a number of years now? If you answer yes, then you may just be sitting on a powerful financial tool without even realising it: home equity.

With the steady growth of property values across NSW, many homeowners are using the equity built up in there existing home to make their next big financial step – buying an investment property.

At Complete by McDonald Jones, we build stress-free, turnkey homes designed to help you start your property portfolio with total peace of mind. Here is your guide to understanding how equity works and how you can use it to grow your portfolio.

What is equity?

Equity is the difference between what your home is worth today, and the remaining balance on your mortgage. You can grow equity in two ways:

• Capital growth: As property values rise over time, your equity increases.
• Mortgage repayments: Every principal repayment you make reduces what you owe.

Total equity vs. Usable equity.

Just like buying a home, banks generally won’t let you borrow against 100% of your home’s value without charging you Lenders Mortgage Insurance (LMI). You will find that most banks cap your borrowing capacity at 80% of your homes current market value – this is called useable equity.

Calculation example:

(Market Value x 0.08) – Existing Mortgage = Useable Equity.

For example, if your home is currently worth $900,000 and you have a Mortgage balance of $480,000.

($900,000 x 0.08) - $480,000 = $240,000

How can I turn equity into a new investment?

Using our calculation example, the homeowner could use the $240,000 of useable income to pay the deposit and addition costs, such as stamp duty and legal fees, for a second mortgage on a new investment property.

Why choose a turnkey home from Complete by McDonald Jones.

Using equity is only half the battle; finding the right investment property is where the magic happens. Investors love Complete by McDonald Jones turnkey homes for three simple reasons:

• Zero surprises or hidden costs: Our fixed-price homes mean you know exactly what you are paying upfront, eliminating unexpected budget blowouts.
• Ready for tenants from day one: Every home comes fully finished, including landscaping, driveway, fencing, floor coverings, modern appliances and more! As soon as you receive the keys, your rental income can start flowing in.
• Maximum tax and depreciation benefits: Buying a brand-new home allows you to maximise tax depreciation claims, helping offset your holding costs.
  
  

How can I get started?

• Get a home valuation: Ask your lender or broker to assess the current market value of your existing property.
• Calculate your borrowing power: Chat to our exclusive team at MyChoice Home Loans, who can work with you to establish your useable equity and total borrowing capacity.
• Set up your loan structure: MyChoice Home Loans will work hard to ensure your existing loan and new equity loan are split correctly to benefit from any potential tax-deductible benefits.
•  Choose your ready-built home: Select a turnkey property in a growth location from Complete by McDonald Jones.

Ready to put your equity to work?

Complete by McDonald Jones takes the complication out of building and investing. Explore our ready-built homes today and start growing your property portfolio with confidence.

Disclaimer: The information in this blog post is general in nature and does not constitute financial, legal or tax advice. Always consult a qualified financial advisor, mortgage broker, or accountant before making property investment decisions.