Does having another property help you get a home loan?

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

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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 belongings 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 August 19th, 2018
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.93%
3.94%
$0
$0 p.a.
80%
A low-fee line of credit loan from an online lender. Unlock the equity in your home and make interest-only repayments with a competitive rate.
5.25%
$0
$349 p.a.
90%
Use the equity in your home to make your next investment move for your future.
6.37%
$600
$150 p.a.
80%
Access your equity with a low variable rate and low fees.
6.38%
$350
$10 monthly ($120 p.a.)
90%
5.67%
$600
$150 p.a.
80%
A low interest rate home loan with a low ongoing fee.
5.64%
$0
$395 p.a.
90%
Low rate equity home loan with no application fee.
5.56%
$600
$10 monthly ($120 p.a.)
85%
A competitive line of credit loan from Heritage Bank.
5.52%
$0
$375 p.a.
90%
Enjoy a discounted rate on your equity loan and fee discounts.
6.38%
$600
$12 monthly ($144 p.a.)
80%
A flexible line of credit with low minimum loan amount.
5.84%
$0
$395 p.a.
90%
Low rate line of credit loan with flexible repayment options.
6.27%
$600
$10 monthly ($120 p.a.)
90%
Consolidate your debt and build wealth with this line of credit loan.

Compare up to 4 providers

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.

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.

Lenders 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.

Start comparing loans for property investment today

Rates last updated August 19th, 2018
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.89%
4.24%
$0
$0 p.a.
80%
Sharp interest only package rate
Fix your rate and minimise repayments for 2 years with this interest-only investor mortgage.
3.99%
3.99%
$0
$0 p.a.
80%
Special discounted interest rate
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
3.98%
3.98%
$0
$0 p.a.
70%
Requires a 30% deposit
Investors can get a 100% offset account and a low rate if they have a big deposit. 100% online application process.
3.91%
3.92%
$0
$0 p.a.
80%
Add an offset account for $10 a month
Investors can go from application to approval in as little as 20 minutes with this innovative online lender.
3.97%
3.99%
$0
$0 p.a.
80%
Competitive investment package loan
Package your owner occupied loan with investment loan and receive a discounted investment rate. 100% offset account included.
4.09%
4.87%
$0
$395 p.a.
90%
10% deposit option available
Buy your investment property and set your repayments for the first year. Available in QLD, NSW and ACT only.
3.99%
5.17%
$600
$0 p.a.
90%
Available with a 10% deposit
Competitive rates for fixed for 3 years with redraw facility.
3.93%
3.94%
$0
$0 p.a.
80%
Competitive investor rate with plenty of features
This investment loan keeps fees low, has a sharp interest rate and comes with a 100% offset account.
3.99%
4.14%
$0
$0 p.a.
70%
Competitive investor mortgage for borrowers with a 30% deposit.
4.29%
4.31%
$0
$0 p.a.
80%
Flexible, low fee mortgage
Investors will pay no application or ongoing fees for this interest-only loan.
4.08%
4.09%
$0
$0 p.a.
90%
Low-fee investor mortgage with a partial offset account. 10% deposit option available.
4.18%
4.18%
$0
$0 p.a.
80%
Competitive investment mortgage
Investors get a 100% offset account and pay no application or ongoing fees on this loan from an innovative online lender.
3.99%
3.99%
$0
$0 p.a.
70%
Save on fees with this investor mortgage
Investors with a 30% deposit can get this low rate loan to fund their property portfolio.
4.29%
4.31%
$0
$0 p.a.
80%
Simple, flexible investment product
A simple, variable rate investor loan from an online lender that keeps fees to a minimum.
3.99%
4.62%
$395
$0 p.a.
80%
Flexible fixed investment loan
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.24%
4.68%
$0
$0 p.a.
90%
Investor loan with a small deposit option
Fix your investment repayments for 1 year. You can get this loan with a 10% deposit. Available in QLD, NSW and ACT only.
4.13%
4.14%
$0
$0 p.a.
90%
Available with a 10% deposit
Access a fee-free offset account and a special interest rate for investors.
4.14%
3.96%
$0
$0 p.a.
80%
Low fee investor mortgage
Investors can go from application to full approval in as little as 20 minutes with this innovative online lender.
4.18%
4.19%
$0
$0 p.a.
80%
Line of credit for investors
Investors can easily access their equity using BPAY, a debit Master Card or cheque book with this interest-only line of credit.
4.31%
3.95%
$0
$0 p.a.
80%
Rapid online application process
A variable interest-only loan for investors. Fast application, low fees, optional offset account. 100% online lender.
4.14%
4.17%
$0
$0 p.a.
80%
Competitive rate for investors
Investors can enjoy flexible repayment options and pay no application or ongoing fees.
3.94%
3.92%
$0
$0 p.a.
80%
Add an offset account for $10 a month
Lock in your interest rate for 2 years and enjoy flexibility, an optional offset account and a fast online application process.
4.29%
4.27%
$0
$198 p.a.
70%
Lock in your investment rate for 3 years
Fund your property portfolio with this fixed rate mortgage which includes a 100% offset account. 30% deposit required.
3.84%
3.91%
$0
$0 p.a.
80%
Flexible low fee mortgage
Enjoy a fast application process and flexible repayment options with this fixed rate mortgage for investing.

Compare up to 4 providers

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Credit services for Aussie Select, Aussie IQ and Aussie Optimizer products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 ("Aussie"), and its appointed credit representatives. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133 Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Optimizer products is provided by Perpetual Limited ABN 86 000 431 827 (Lender). Credit for Aussie IQ is provided by Macquarie Bank Limited ABN 46 008 583 542 AFSL and Australian Credit Licence 237502. Home loans issued by the Lender are serviced by Macquarie Securitisation Limited ABN 16 003 297 336, Australian Credit Licence 237863 (MSL).

Aussie is a trade mark of AHL Investments Pty Ltd. Aussie is a subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. ©2018 AHL Investments Pty Ltd ABN 27 105 265 861 Australian Credit Licence 246786.

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Marc Terrano is a content marketer manager at finder. He's been writing and publishing personal finance content for over five years and loves to help Australians get a better deal.

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