I know this is a basic question – but I just wanted to double check.
I’ll be using equity in my own home to purchase an investment property.
How exactly do I access that equity? Must I refinance – and therefore incur application/settlement etc fees and further mortgage insurance as my current LVR is over 80%?
Or is it a paper exercise where the valuation shows I have the equity available in my own property?
Thanks so much,
RL
To access equity in your own home, you must increase your loan. As you are already over the 80% mark (and I assume you did this recently), you may have trouble accessing more.
If you had the property for a while and the value went up a lot, yes you have to either refinance or increase your morgage with your existing bank. It would definetly be worth the exercise to not only talk to your bank, but try different options. Even so you may have to pay additional fees, you may find a loan with lower interest rates or one that allows you higher LVR.
But be very careful, moast areas are in a flat to down market and you may be over commiting yourself. Your best approach may be debt consolidation and budgeting to get some working capital.
Good Luck
Thanks for your reply.
Yes, I did commit to the loan on my own home fairly recently, so have just shelled out quite a bit in LMI and an am not all that keen to do it again.However, I do want to start investing as soon as possible so I’ll make enquiries in six months or so about increasing my loan.
Thanks again,Red
You can refinance upto 95% LVR so don’t let that be a barrier to starting investing.
Make sure that your existing loan is structured in such a manner that is effective by ulising a interest only loan and offset account.
Remember that when you refinance the LMI charged on the amount of money that is being used for investment becomes Tax deductible.
LMI is merely a cost of borrowing and is therefore deductible over the term of the loan or 5 years whichever is the lesser. It is proportional in the first year.
Each lender has a different LMI scale as well as both of the main LMI companies so it is extremely important that you shop around to ensure you have the most competitive deal.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
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