Leveraging the equity in your existing property can be a smart strategy to grow your investment portfolio, but it’s essential to understand your options and avoid unnecessary costs. Here’s how one of our recent clients saved $30,000 in lender’s mortgage insurance (LMI) and secured a better deal by seeking a second opinion.
The Client’s Story
A medical professional approached their existing lender to release equity from their current property and purchase a new investment property. The lender quoted them $30,000 in LMI, even though they had a strong financial profile. Unsure about this cost, they decided to seek a second opinion and consulted with us.
By exploring alternative options, we introduced the client to a lender offering a professional’s package. This package allowed them to:
- Borrow up to 90% of the property’s value.
- Release equity from their current property without incurring LMI.
- Secure a more competitive interest rate.
As a result, they saved $30,000, obtained better loan terms, and successfully purchased their investment property.
How Can You Release Equity From Your Existing Property?
Releasing equity means accessing the difference between your property’s market value and the remaining balance on your mortgage. This equity can be used as a deposit or funding source for purchasing another property, enabling you to expand your investment portfolio without needing significant upfront cash.
Key Benefits of Using Equity for Property Investment
Avoid Lender’s Mortgage Insurance: Professional packages allow eligible borrowers, such as medical professionals, to borrow up to 90% of the property value without paying LMI.
Access Better Interest Rates: Specialised loan products often provide more competitive rates for high-income earners.
Maximise Your Investment Potential: Using equity lets you leverage the value of your existing property to purchase another asset.
Save on Upfront Costs: Equity can serve as your deposit, reducing the need for out-of-pocket expenses.
Why a Second Opinion Matters
Relying solely on your existing lender might limit your options. Different lenders have varying policies, packages, and benefits tailored to specific borrower profiles. Working with a mortgage broker ensures you’re exploring all possibilities to find the best deal for your situation.
FAQs
1. What does “releasing equity” mean, and how can it help me buy another property?
Releasing equity means accessing the difference between your property’s market value and the remaining balance on your mortgage. This equity can be used as a deposit or funding source to purchase an investment property, reducing the need for upfront cash.
2. Can I avoid paying lender’s mortgage insurance (LMI) when using equity?
Yes, certain lenders offer professional packages that allow borrowing up to 90% of a property’s value without paying lenders mortgage insurance (LMI). This can be especially beneficial for medical professionals and other eligible high-income earners, saving thousands of dollars.
3. How do professional packages work for property purchases?
Professional packages are tailored loan products for high-income professionals, such as doctors or lawyers. These packages often provide benefits like higher borrowing limits, waived LMI, and lower interest rates, making it easier to leverage equity for investment purposes.
4. Should I rely on my existing lender when using equity to buy a property?
Your current lender may not always offer the best deal. It’s essential to shop around or consult a mortgage broker to compare options. A broker can find lenders with competitive rates and features, such as no LMI professional packages.
5. What are the key benefits of using equity for property investment?
Using equity allows you to expand your property portfolio without needing large cash savings. It can help you secure better financing terms, avoid unnecessary fees like LMI, and potentially access lower interest rates, all while leveraging the value of your existing property.
Contact Us for Expert Advice
Ready to explore how you can use equity to purchase your next property? Our experienced mortgage brokers are here to help. Get in touch today to review your options and secure a deal tailored to your needs.
@maddievisserfinance How we helped our client use the equity in their home to buy an investment property - and avoid $30,000 in lenders mortgage insurance (LMI)! #mortgagebroker #mortgageadvice #loan #equity #homeloan #fyp #moneytalks #buyahome ♬ original sound - MV Finance
