Professionals Real Estate 
Maximise your property potential with our latest guide on using equity to buy another property in Australia! Learn how to leverage your assets for greater financial growth and investment opportunities.
Understanding Equity
Equity is essentially the portion of your property that you truly own outright. It grows over time as you pay down your mortgage and as the value of your property increases. For example, if your property is worth $600,000 and your mortgage balance is $400,000, you have $200,000 in equity.
Using Equity to Buy Another Property
1. Conduct a Property Valuation
The first step is to determine the current market value of your property. This can be done through a professional property valuation or by researching recent sales of comparable properties in your area.
2. Calculate Your Available Equity
Once you have a valuation, subtract the outstanding balance of your mortgage from the property’s value. The resulting figure represents your available equity that you can potentially use to purchase another property.
3. Explore Financing Options
There are several ways to access your equity to finance the purchase of another property:
- Home Equity Loan (HELOC): A home equity line of credit allows you to borrow against the equity in your property. You can use the funds for various purposes, including the purchase of another property.
- Cash-Out Refinance: This involves refinancing your existing mortgage for a higher amount than what you currently owe. The difference between the new loan amount and your existing mortgage balance is paid out to you in cash, which can be used for your next property purchase.
- Deposit Bond: If you don’t want to access cash from your equity, you can use a deposit bond instead. This acts as a guarantee to the seller that you will pay the deposit upon settlement.
4. Consider Tax Implications
It’s essential to consider the tax implications of using equity to buy another property. While interest on loans used to purchase income-producing assets may be tax-deductible, it’s advisable to seek advice from a tax professional to understand your specific situation.
5. Research Property Investment Opportunities
Once you have secured financing, research potential investment properties carefully. Consider factors such as location, rental yield, potential for capital growth, and ongoing expenses.
6. Plan for Repayment
Using equity to purchase another property increases your overall debt level. It’s crucial to have a repayment plan in place to manage your mortgage obligations effectively and minimize financial risk.
