Hi,
Just wondering whether it would be possible to borrow against equity built up in an IP (that was previously an PPOR).
Is that allowed once it becomes an IP? Also when borrowing aginst the equity, will that mean the principal of the property gets reduced assuming the loan is P&I? i.e. more interest repayments Any feedback most welcome and appreciated
Thanks,
Kenzel
kenzel,
yes you can borrow again the equity regardless, not clear on what you mean when you say
"Also when borrowing aginst the equity, will that mean the principal of the property gets reduced assuming the loan is P&I? i.e. more interest repayments"
are you topping up the existing loan perhaps? Cant figure it out??
Event Horizon – pls consider the following example
Total House Value – $300K
Total Loan Remaining – $170K
Total Equity – $120KIf I were to borrow against the full equity amount (i.e. 120K) will the new figures be –
Total House Value – $300K
Total Loan Remaining – $300K
Total Equity – $0KSorry should've explained with an example at the start
Thanks
Hi Kenzel
Assuming you could find a lender to agree to allow a 100% refinance then Yes you could go upto $300K and draw out the available equity.
In saying this remember that the interest charged on the loan would not be tax deductible unless the funds drawn down where used to generate an income or for investment.
You would want to make sure that the loan was structured correctly to maximise your tax deductions and reduce the interest charged on any non deductible portion.
Richard Taylor | Australia's leading private lender
kenzel,
ok i get it!!
Your equity on the existing remains the same as it currently is. The equity on the new purchase will depend on how you intend to finance it and how much of all costs you plan on borrowing.
Remember your lender may only lend you 80% of your LVR and if you get a loan for more you need to factor in mortgage insurance plus all the usual buying costs..
kenzel
just to add,
that means your new equity will obviously be the total value of the 2 properties combined minus the loans against them.
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