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Using your home to buy an investment property.

If you own your own home, you may be able to invest in residential property. How? Using your equity.

Equity is the difference between your home’s value and the amount of your mortgage.

For example, if your home is valued at $800,000 and you owe $500,000 on the house to the bank, you have $300,000 in equity.

The value of your property usually increases as you make regular mortgage repayments, and/or if the property market values are trending upwards, which is the case in the Nelson Tasman region. You may find you have been building up equity in your home without realising it. A great tool for checking your home’s value is homes.co.nz.

You may be able to borrow money against this equity for an investment property. Essentially, you are funding the deposit for your investment property by borrowing the deposit itself. The more equity you have, you more you may have access to, with a few provisos of course.

There are two ways to access the equity in your home, each with its implications that we recommend you seek advice on. This is where we can help.

  1. Cross collateral: This is where you ‘access your equity’ and buy the rental property with a cross collateral 100% loan.
  2. Stand-alone: This is where you ‘release your equity’ as cash from one property and use it as a deposit for the second property, keeping both properties independent.

Sound daunting? There is a lot to think about for example how to structure your loan and the tax-deductibility of your investment property. We can make it easy for you.

Find out more about how you can use your equity to start investing in residential property, get advice on building a residential property portfolio for your retirement and understand how property investment can help you pay off your mortgage faster and give you financial security at our Property Workshops series.

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