Example: Brad wants access to his equity
Brad owns a home worth $500,000 and owes $200,000 on the mortgage. This means he has $300,000 in equity and a loan-to-value ratio (LVR) of 40%. After doing some research and speaking with his mortgage broker, Brad decides to buy an investment property. He refinances his existing mortgage with a new lender to get access the $200,000 of equity, which brings his LVR up to 80%.
Brad could've refinanced up to as much as a 90% LVR, giving him more to invest, but he decides not to as this would mean he'd have to pay a lender's mortgage insurance (LMI) premium.
With his $200,000, Brad buys an investment property and uses a combination of rental income and his salary to gradually pay it off.
I was wondering if you can transfer your equity from an investment property to your place of residence. E.g. I have a home valued at $265,000 and owe $130,000 then i have an investment rental property valued at $250,000 and a loan of $160,000
can i refinance the rental so that i owe $200,000 and put the $40,000 onto my home loan so i only owe $90,000 on my house maximising the tax deductibility of my rental whilst minimising my current house loan?
Hi Tyronne,
Thanks for your question.
Accessing your equity to put the funds into your main residence is definitely possible. If you find that none of these loans are suitable for your situation, there is always the option of speaking to a home loan broker. A broker can help you understand your financial position and they can leverage their panel of networks to find a lender that is more inclined to review your application.
Regarding tax-deductibility, you will need to confirm this aspect with your trusted accountant.
Cheers,
Shirley