subject: Use Equity Leveraging For A Home Loan Down Payment [print this page] There once was a time when a consumer could obtain a 100 percent loan in the Australian mortgage market. Those days are pretty much long gone now. However, a savvy home loan consumer can structure a mortgage that covers 106 percent of the costs associated with purchasing a piece of property. Also, when this home loan is structured correctly, the borrower will realise a maximum amount of tax deductions using equity leveraging to complete the task. Yet, before sailing to this port, check with a qualified tax consultant who can better advise you about the benefits you can find through use of a home loan for investment purposes.
So, whats this Equity Leveraging?
Consumers can use the equity in an existing property to invest in additional real estate. An equity line of credit can be established at a lending institution based upon how much value is stored in a property owned. Lets say you have a property that is valued at $300,000 with an outstanding loan balance of $150,000. You want to purchase another property worth $250,000. In order to maximise tax benefits youll need to come up with 24 percent of the purchase price to cover the needed 20 percent down payment and additional home loan fees and closing costs. You qualify for the 80 percent home loan of $200,000. You would refinance your existing property for $210,000, which would net you $60,000 in cash for investment purposes. This produces a tax-deductible investment amount of $260,000 which is 104 percent of the new property purchase price. You accomplish buying a second piece of real estate with no money coming out of your own pocket while gaining valuable tax advantages. Again, you should always seek the guidance of a financial consultant to understand all the consequences pertaining to your own personal scenario.
Prepare for the Home Loan Journey
Use of a variable investment calculator will allow examination of several possible results and returns you may experience when using a home loan as an investment vehicle. You can find a variety of useful home loan calculators online. Once you input necessary information, click you mouse for the revealed results. The information you obtain can help guide you when seeking a home loan for investment purposes. Check out what monthly rent you need to charge to cover all expenses. Or plug in all the variables needed for monthly expenses to determine what cash flow you will experience. You can use such a calculator to gain information in a number of categories including:
How much you can afford to borrow
What the loan to value ratio will be
How much of a down payment you need
Rental income scenarios ( learn amount to meet payments or amount to produce income)
Property expenses
Cash flow information
ROI (Return On Investment)
Various tax advantages
Use an online investment calculator to gain a great amount of information that you can bring to the table when meeting a home loan expert for obtaining the best mortgage to suit your needs.
by: David Nalin
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