{"id":8561,"date":"2016-07-09T08:30:45","date_gmt":"2016-07-08T22:30:45","guid":{"rendered":"http:\/\/www.realestatetalk.com.au\/?p=8561"},"modified":"2016-07-09T08:30:45","modified_gmt":"2016-07-08T22:30:45","slug":"refinance-your-home-loan-to-buy-investment-property","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/refinance-your-home-loan-to-buy-investment-property\/","title":{"rendered":"Refinance Your Home Loan to Buy Investment Property – Andrew Mirams"},"content":{"rendered":"

 
\nProperty investment can be an excellent way to build capital growth and secure your finances for the future. But for those ready to take the next step in their property ownership, the many choices and decisions can be quite daunting. Refinancing and leveraging equity can be a helpful stepping stone towards purchasing your investment property, but without educated and well-executed decisions, this option can end up costing home-owners more money and in turn they face to lose not only future investments but also their existing properties.
\nEvery person considering this really should approach a property savvy finance strategist to ensure you get your \u201cducks in a row\u201d and that your desired goals can be matched in an orderly fashion against the requirements of the day (and more importantly, the future!).<\/p>\n

What is Equity?<\/h3>\n

\"SeeingEquity is the difference between the value of your home and the principal amount you have left on your mortgage. You can use this\u00a0equity as\u00a0security with the bank to borrow more against it to buy property investments. But you can\u2019t borrow against all of your equity, only a certain proportion is useable. Generally, banks will lend you 80% of the value of your equity. This ensures that if property prices drop, the amount you owe will never exceed your property\u2019s value. But, it may be possible to lend beyond 80% (up to 90% or even 95% in some circumstances) by taking out Lenders Mortgage Insurance (LMI)<\/a>.<\/p>\n

The Benefits of Leveraging Equity<\/h3>\n

Equity allows you to borrow more than you would otherwise be able.<\/em><\/strong>
\nThe equity in your property gives lenders security over your property and allows you to borrow more money to invest further.
\nFor example, you might buy a property for $400,000 by putting down a 20% deposit of $80,000 and borrowing the remaining 80%, which is $320,000. The property could increase in value over time by an extra $100,000. Your 80% mortgage is now only 64% of the value of your home and that isn\u2019t putting into consideration any of the principal amount that you\u2019ve already paid off. You then decide to use this equity and refinance the home loan to 80% of the current value of your property – $500,000. This frees up $80,000 of cash that you can put towards a deposit for a new investment property.
\nDevelop your investment portfolio and create more wealth.<\/em><\/strong>
\nYou can reap the benefits of rental return and potential capital growth, which can help you pay off existing mortgages or invest in more. Either way, with well-researched decisions and sound financial backing, investment properties can secure your wealth for the future.<\/p>\n

The Potential Risks<\/h3>\n

Depreciation\"Planning,
\n<\/em><\/strong><\/p>\n

If your property value decreases, it can become difficult to build up more equity and you could find yourself in a worse financial position. In order to avoid this situation, make sure you research your location and trends in the market. A good location will ensure capital gain over time and in turn more equity.<\/p>\n

Refinancing costs<\/em><\/strong>
\nNot everyone is aware of the costs associated with refinancing. Switching lenders and refinancing your existing loans can be a rather costly project. Depending on your loan, you may be required to pay discharge fees, government fees, application fees or establishment fees. This can very quickly add up to thousands of dollars worth of unexpected costs so educate yourself and have a chat to a professional.
\nMarket risk<\/em><\/strong>
\nIf there is not enough demand for your type of property in the area, then your rental income may be far less than you were originally predicting and this could also alter whether or not you can afford the property in the first place. You can do your research beforehand by searching the local council\u2019s website for any planned infrastructure developments and consider public amenities to determine whether or not people will rent in the area and how high demand will be. If it is not a desirable property, renters won\u2019t pay premium rental prices.
\nDifficult tenants<\/em><\/strong>
\nNot everyone is going to do right by you especially when you become a landlord. With any investment property, you run the risk of having difficult tenants in your house who may refuse to pay rent or who vacate the property without sufficient notice. These situations will leave you with an empty investment property and unfortunately you\u2019ll still need to be paying off the mortgage during these periods. You should always have some money saved that can cover repayments for these unexpected events.
\nIf you can\u2019t make repayments, you could stand to lose all assets<\/em><\/strong>
\nIf you do find yourself in a situation where you simply can\u2019t make your repayments, you stand to lose everything \u2013 your investment properties and your principal property of residence (PPOR). This is of course something you want to avoid at all costs. Whenever you\u2019re thinking about the next step in your property investing career, always ask yourself if you have the funds to support yourself in a worst-case scenario circumstance. If the answer is no, you may need to hold off on investing in property and save more to ensure your financial safety.
\nFor more advice on whether or not refinancing is a wise financial decision for you, organise a consultation<\/a> with one of the experienced team members at Intuitive Finance.
\n 
\n*The information provided in this article is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

  Property investment can be an excellent way to build capital growth and secure your finances for the future. But for those ready to take the next step in their property ownership, the many choices and decisions can be quite daunting. Refinancing and leveraging equity…<\/p>\n","protected":false},"author":176692471,"featured_media":8567,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[2,32,34,36,17,25],"tags":[54,107],"class_list":["post-8561","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-andrew-mirams","category-buying-a-property-topic","category-finance-topic","category-property-investment-topic","category-property-investment","category-sponsored-channels","tag-buying-property-investment","tag-property-investment-2"],"yoast_head":"\nRefinance Your Home Loan to Buy Investment Property - Andrew Mirams - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/refinance-your-home-loan-to-buy-investment-property\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Refinance Your Home Loan to Buy Investment Property - Andrew Mirams - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"  Property investment can be an excellent way to build capital growth and secure your finances for the future. 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