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How to buy a second property with no deposit

clock icon April 28, 2017
tag iconInvesting in Property Savings & Deposits Wealth Strategies

Are you looking to buy a second property but don’t have enough cash deposit? You’ll be pleased to know you don’t need a deposit because you can use your existing home equity to purchase a new property.

If you’ve owned your home for a few years, there’s a good chance you’ve built up some reasonable equity, and this can be a valuable resource when it comes to property investment.

A line of credit allows you to borrow against the equity in your existing home and you only pay interest on the amount you draw. This process is called leveraging.

Can I buy a house with no deposit?

Leveraging the equity in your existing home to purchase a new investment property is a simple concept. Your home’s equity is the difference between your current property’s market value and the balance of your mortgage.

So what exactly does leveraging your equity mean? Essentially, it’s borrowing to increase the potential of return on your investment, in this case, your second property. For example:

Imagine if the existing value of your home is $500,000 and the balance of your mortgage is $300,000.

The difference between the two is $200,000 and this is your home equity.

As an investor, you can access up to 80 per cent of this amount without having to pay Lender’s Mortgage Insurance, leaving you with $160 000 to use as a deposit on your second property.

By using your equity in this way, you minimise your risk as you’re not using your actual cash reserves or savings. Saving for a deposit can also take a long time and in that period the price of the property you want to buy may increase substantially. So by using the equity in your home, you benefit by getting into the property market now, at today’s prices, and you can enjoy the increase in property values that time brings.

Successful Ways Mortgage Brokers can help you to work out how much equity you have in your property and how it can be accessed to fund your investment.

If you’d like to learn more about leveraging, equity and investing in real estate, attend a Wealth Creation Seminar in the Sydney CBD. Tickets are now only $33 per person with discount code: SW50BLG

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