Refinance Your Home Loan To Buy An Investment Property

Coins and housesStart your path to investment wealth by refinancing your mortgage to fund your investment property.

Many Australians refinance in order to purchase an investment property to benefit from rental return and potential capital gain which can help borrowers repay their mortgage or use money to invest further.

While buying a property investment may be a good strategy, coming up with the funds for a deposit and associated holding costs can be difficult particularly if you already have a mortgage that you're paying off.

Learn more about investing in property

Refinancing is one way to help buy an investment property. It simply involves you refinancing your existing home loan and getting access to your equity to use as a deposit to purchase another property and diversify your portfolio.

Take a look at this example:

Brad wants access to his equity

Handsome but balding man.Brad owns a home worth $500,000 and owes $200,000 left on it. 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.

If Brad built up more equity in both his home and investment property, you can see how Brad could carry this out again to purchase another investment property.

The risks of refinancing to invest in a property

Refinancing to borrow more and invest in an investment property can be a useful strategy for some borrowers, but make sure you evaluate the risks, such as:

  • Depreciation. If the property falls in value, it may be difficult to build up further equity and you may be in a worse financial position. To minimise the risk of your property depreciating in value, make sure you carefully research the property market to buy in a location that is likely to provide capital gain over time.
  • Market risk. If there is limited price growth in the area or there is not enough demand for property, then you may not receive a substantial rental income to cover your repayments. This is why it is essential that you conduct thorough research to ensure that there will be enough demand for your property type. Jump onto the council website to see what planned infrastructure developments are coming up and consider factors such as public amenities and days on market (DOM) to determine whether people are renting in the area.
  • Difficult tenants. As an investor, you run the risk of having difficult tenants who may refuse to pay rent, or who may vacate the property without giving you sufficient notice. As a result, you may face untenanted periods where you need to use your savings to cover the repayments until you can find a new tenant. You can lessen this risk by using a property manager to help you attract high-quality tenants.
  • Refinancing cost. Switching lenders and refinancing your mortgage can be an expensive process which is why you need to estimate the total refinancing costs involved. Sit down with an accountant and a mortgage broker to carefully consider the costs that you'll incur from exiting your current loan (e.g. discharge and government fees) as well as the costs of setting up a new home loan (e.g. application or establishment fees).

Next steps

The risks associated with buying a property and the fact that your home is being used to fund it mean you should get professional advice and do your own research.

Decide the type of property you'd like to invest in- residential or commercial, apartment or house- as well as the areas you'd like to buy in.

Access suburb reports from sources such as RP Data and speak to as many professionals as you can to ensure that refinancing to invest in property is a sound financial strategy for you.

Compare refinancing options for your next investment in the table below

Rates last updated May 27th, 2019
$
Loan purpose
Offset account
Loan type
Repayment 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
3.99%
3.99%
$0
$0 p.a.
80%
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
3.99%
3.99%
$0
$0 p.a.
70%
Investors with a 30% deposit can get this low rate loan to fund their property portfolio. Take advantage of split and redraw facilities.
3.83%
3.84%
$0
$0 p.a.
80%
This investment loan keeps fees low, has a sharp interest rate and comes with a 100% offset account.
3.99%
3.95%
$0
$0 p.a.
80%
A competitive variable mortgage for investors looking to refinance. Principal and interest repayments. Refinancers only.
3.89%
4.95%
$0
$395 p.a.
90%
Buy your investment property and set your repayments for the first year. Available in QLD, NSW and ACT only.
3.99%
4.56%
$0
$10 monthly ($120 p.a.)
90%
Low introductory variable rate home loan.
4.09%
3.99%
$0
$0 p.a.
80%
A low interest only variable mortgage for investors who wish to refinance to a lower rate. Refinancers only.
3.94%
3.97%
$0
$10 monthly ($120 p.a.)
80%
A variable investor loan with low fees and a 100% offset account.
3.97%
4.28%
$0
$299 p.a.
80%
A competitive package rate for loans above $150,000. Optional 100% offset account.
3.89%
5.24%
$300
$10 monthly ($120 p.a.)
80%
A flexible, competitive fixed rate loan that allows for extra repayments.
3.99%
4.38%
$0
$395 p.a.
95%
A package loan that offers discounts and a 100% offset account.
4.05%
4.22%
$0
$10 monthly ($120 p.a.)
90%
Lock in your interest rate on your investment property for 2 years. Earn Velocity Frequent Flyer Points.
4.03%
3.92%
$499
$0 p.a.
80%
A competitive 3 year investor rate with principal and interest repayments. Optional offset account with a $10 monthly fee.
4.32%
4.37%
$600
$0 p.a.
80%
An investment loan for new Heritage Bank customers. Low fees and interest-only repayments.
3.99%
4.40%
$0
$395 p.a.
95%
A package loan that offers discounts and a 100% offset account.
3.99%
4.13%
$0
$10 monthly ($120 p.a.)
80%
A competitive variable rate home loan with no application fee.
4.13%
4.14%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
4.69%
4.23%
$499
$0 p.a.
80%
Fix your rate for 5 years while you pay off your investment property. Add an offset account for just $10 a month.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
3.94%
4.76%
$0
$0 p.a.
90%
Fix your investment repayments for 1 year. You can get this loan with a 10% deposit. Available in QLD, NSW and ACT only.
4.14%
4.64%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.

Compare up to 4 providers

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2 Responses

  1. Default Gravatar
    TyronneFebruary 23, 2015

    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?

    • Avatarfinder Customer Care
      ShirleyFebruary 23, 2015Staff

      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. They’ll be able to help you further should need further help in narrowing down a suitable home loan option.

      Regarding tax deductibility, you will need to confirm this aspect with your trusted accountant.

      Cheers,
      Shirley

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