Unlocking Your Home’s Equity to Invest in Property

Looking to expand your investment portfolio but find that most of your wealth is tied up in your home? You might be able to use the equity in your property, thanks to recent market gains, to fund a new investment property. Let’s break it down.

Most of us have some financial goals we’re working towards. For many Australians, owning an investment property is one of them.

In fact, a significant number of Australians (21%) aim to invest in real estate as a way to build their wealth, according to the MLC Financial Freedom report. This goal is even more prevalent among younger generations, with 27% of Gen Zs and 23% of Gen Ys expressing this aspiration.

The trend isn’t just about aspirations; it’s also reflected in the market, with lending for investment properties increasing by over 30% in the past year, according to the Australian Bureau of Statistics.

It’s easy to understand why this is happening.

Over the last five years, rents have jumped by 39.7%, rental vacancy rates are extremely low at just 1.3%, and home values across Australia have risen 13.5% since January 2023.

How Recent Property Price Increases Can Benefit You

According to CoreLogic’s latest Pain and Gain report, property profits have reached a 14-year peak, with the median profit for homes resold in the first quarter of 2024 hitting $265,000.

But how can you tap into these gains without selling your home?

Here’s an example to illustrate:

Imagine you purchased a house for $750,000 five years ago, and thanks to recent property price hikes, it’s now valued at $1 million.

Let’s say your original loan was $600,000, and you’ve managed to pay it down to $500,000.

By refinancing your remaining $500,000 mortgage into a $700,000 loan (which is 70% of your home’s current value), you could unlock $200,000 in equity. This amount could then be used as a deposit for an investment property.

Keep in mind, banks typically allow you to borrow up to 80% of your property’s market value with this strategy.

So, if you refinanced to an $800,000 loan, you could access $300,000 in equity.

This approach enables you to step into property investing—potentially enjoying rental income, capital gains, and tax benefits—without needing to dip into your cash savings.

Even better, if your investment property appreciates, you can use the rising equity from that property to invest in more properties.

Other Avenues to Property Investment

There are various routes to becoming a property investor. You might have enough funds for a cash deposit, or perhaps you’re considering holding onto your current home and renting it out when you upgrade to a new one.

Alternatively, you may have different investment goals, such as using your home’s equity to invest in shares or boost your superannuation. What’s crucial is understanding the options that fit your situation.

Interested in learning more? Get in touch with us today to explore how Osinski Finance can start your journey as a property investor or become a first-home buyer.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.