Does having another property help you get a home loan?

Rates and Fees verified correct on March 26th, 2017

Thinking about buying a second home? Make sure you know the facts and risks involved before heading to the mortgage lenders.

Some say buying your second home is more stressful than the first. It’s not all about you anymore, now you need to think of the kids, the car and the in-laws.

unlocking equity

So, if you’re thinking about buying, today is the time to strike. The property market is recovering and home buyers now have a rare investment opportunity to secure second property at prices of those well under 2007.

Does having another property help you in getting a home loan?

The simple answer is yes. This is because property is typically is an asset that's worth a lot, the greater the value of your assets, the more you chance you have of getting a second loan. But be careful. There have been cases where people who’ve applied for home equity loans have spent their money on luxury things like boats and cars, leaving no way to pay it back.

However, using your property to finance a loan is a great way of expanding your portfolio - for serious investors who are disciplined in their approach. For others, it might be a good chance to help a family member buy their dream home.

information on expanding you property investment portfolio

Using the equity in your home to get another mortgage

How much you can borrow depends on your financial situation. Your bank will look at the value of your primary residence, your debt history, your income and any other assets you have when deciding on the value of a loan.

If you do have an existing loan, you must refinance it as part of the equity loan application. This means that the lender will look at every single detail of your finances; from your car, to the things in your house.

It's usually cheaper to borrow up to 80% of the value of your current property. This is so, because if you borrow more than 80% LVR, you will incur a lender’s mortgage insurance premium which could cost tens of thousands of dollars.

Determining which loan structure is best suited for you

The line of credit loan (LOC)

Your lender will set you up with a line of credit (LOC), which is a flexible loan that allows you to use your cheque account, withdraw money and repay as you choose.

You are given two options: make repayments on a monthly basis or don’t make a payment as long as you remain below the agreed spending limit set by the lender. However, borrowers who cannot afford to make additional repayments would be in trouble if they were to refinance to an LOC - this is because it offers a higher interest rate which could surpass any savings made by combining your accounts.

Lenders that offer Line of Credit Loans

Rates last updated March 26th, 2017.

IMB Platinum Package - Equity Line Advantage (Owner Occupier)

Interest rate is now 4.89%

January 30th, 2017

IMB Platinum Package - Equity Line Advantage (LVR<=90% Investor)

Interest rate increased by 0.10%

January 30th, 2017

State Custodians Line Of Credit Loan - <= 80% LVR (Owner Occupier)

Interest rate increased by 0.10%

February 27th, 2017

View latest updates

Jodie Humphries Jodie
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
State Custodians Line Of Credit Loan - <= 80% LVR (Owner Occupier)
No application fee and competitive interest rate to access the equity in your home.
3.69% 4.03% $0 $299 p.a. 80% Go to site More info
NAB Portfolio Facility (LOC) - $250,000 to $499,999
A line of credit home loan with no application fee.
5.51% $0 $550 p.a. 90% Go to site More info
4.89% $445 $0 p.a. 90% Go to site More info
NAB Portfolio Facility (LOC) - $500,000 to $999,999
Pay no application fee and enjoy a low interest rate.
5.41% $0 $550 p.a. 90% Go to site More info
State Custodians Line Of Credit Loan - LVR 80% to 90% (Owner Occupier)
Borrow up to 90% property value and pay no application fee.
3.79% 4.12% $0 $299 p.a. 90% Go to site More info
IMB Platinum Package - Equity Line Advantage (Owner Occupier)
Package with $0 application fee and you can borrow up to 90% LVR.
4.89% $445 $0 p.a. 90% Go to site More info
NAB Portfolio Facility (LOC) - $1,000,000 and above
Borrow against your equity for investments and other purposes and get a competitive interest rate.
5.31% $0 $550 p.a. 90% Go to site More info
4.99% $0 $395 p.a. 90% Enquire now
Westpac Equity Access
Access a line of credit home loan through Westpac.
6.08% $600 $10 monthly ($120 p.a.) 95% Enquire now
Bankwest Complete Home Loan Package Equity - $500k to $750k
All the benefits of Bankwest's Complete Package Home Loan with a line of credit.
4.77% $0 $395 p.a. 90% Enquire now
Heritage Bank Living Equity Line of Credit - Owner Occupier (New Customers Only)
A competitive line of credit loan from Heritage Bank.
5.26% $600 $10 monthly ($120 p.a.) 85% Enquire now
Suncorp Home Package Plus Access Equity - $150K & $499,999 (LVR 80% to 90%)
Enjoy a discounted rate on your equity loan and fee discounts.
5.47% $0 $375 p.a. 90% Enquire now
Commonwealth Bank Viridian Line of Credit - Variable
A flexible line of credit with low minimum loan amount.
5.78% $600 $12 monthly ($144 p.a.) 80% Enquire now
St.George Portfolio Home Loan With Advantage Package - $150K to $249k (Special Discount)
Low rate line of credit loan with flexible repayment options.
5.19% $0 $395 p.a. 90% Enquire now
AMP Professional Package Line of Credit - $250,000 to $749,999 (Owner Occupier)
Use the equity in your home to make your next investment move for your future.
4.39% $0 $349 p.a. 90% Enquire now
Suncorp Access Equity Line of Credit
Consolidate your debt and build wealth with this line of credit loan.
6.02% $600 $10 monthly ($120 p.a.) 90% Enquire now
Homeloans Ultra Line of Credit
A line of credit home loan with no application fee aor ongoing fee and borrow up to 90% LVR with redraw facility.
4.54% 4.58% $0 $0 p.a. 90% Enquire now

The 100% offset home loan

A 100% offset home loan can offer you the same advantages of an LOC, but with interest rates that are comparatively lower.

Instead of earning interest on your offset account, you save interest on your home loan. The benefits of this is that the savings account is much lower than what the bank charges you on your home loan.

Dual income families with high monthly expenses tend to benefit the most from this type of loan, as they need the funds for their regular spending. For example, if you had a home loan of $500,000 and you had an offset account with $100,000 then the bank would only charge you interest as if you owed them $400,000.

Lenders that offer 100% offset home loans

Rates last updated March 26th, 2017
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
ANZ Fixed Rate Home Loan - 1 Year Fixed (Owner Occupier)
Fixed rate home loan option with offset facility.
4.54% 5.23% $600 $10 monthly ($120 p.a.) 95% Enquire now
ANZ Standard Variable Home Loan
Hard to beat flexibility and value with the ANZ Standard Variable Loan offer.
$600 $5 monthly ($60 p.a.) 90% Enquire now

How to support a second mortgage

There are several things to consider when taking your second mortgage. The most important one is to ensure you make your loan suit your circumstances.

If you’re buying for investment reasons, it is essential to obtain a rental estimate letter from the real estate agent currently handling the property that you wish to buy.

Lender’s only consider around 50-75% of your rental income. To ensure that your property doesn’t become an issue, choose a property that is well located and is able to support a constant flow of income.

It’s worth mentioning that if you are planning to use your existing property as security to fund the deposit for the second one, you are putting yourself at risk at losing both because your using your first home to guarantee the mortgage on your second home.

Beware of the traps

Always have a strong contingency plan and a comfortable financial back-up plan for when circumstances suddenly change.

‘It's vital that those taking out a second home loan take family planning into account for the future, because this is how a lot of people get into trouble. Not everyone plans to have another child but it happens and this adds a lot of financial stress to the process,’ explains Philip Minett, branch manager at Wizard, Sydney CBD.

Be responsible

If you have noticed that you’ve consolidated debt more than once in your life, then the problem is your spending habits, not the loans. Once you have completed a debt consolidation do not apply for more, or you’ll end up in a cycle of spending and consolidating - which will result in you losing your equity.

Marc Terrano

A passionate publisher who loves to tell a story. Learning and teaching personal finance is his main lot at Talk to him to find out more about home loans.

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