Do you have your sights on a second home? You can maximise the buying power of your next home by utilising your current home’s equity! With your accrued equity in your existing home, you may be eligible to use up to 80% of that equity towards your next home purchase.
Home equity loans. First, you will need to provide your mortgage broker to buy a second home under a home equity loan. A letter from a conveyancer should suffice and be included within your loan application. You should also be able to convey to your mortgage broker that your current property will be used as a security where its equity will be used as a deposit to support a second home loan. If you are approved, your mortgage broker may provide the loan as a line of credit or a lump sum amount.
Choose between a line of credit or lump sum amount. With a line of credit acquired after putting forth your home’s equity, you will only need to pay interest on the equity amount released by your mortgage broker. In your best interest, consult with your mortgage broker to keep unused equity in an offset sub-account to prevent unwanted interest from accumulating. Otherwise, if you receive a lump sum amount to cash out your home’s equity, you will pay interest on the entire loan amount. However, you may have greater buying power with a lump sum amount compared to a line of credit.