Using equity to purchase second home

[milt1968]

I have been doing some research into using equity to purchase a second home or investment property.

What are peoples opinions on this?

Also, what do you think the best type of home loan is?

T

[Harvey Specter]

If you mean equity in an existing home, its easy to do and banks will almost require a cross guarantee anyway (unless you use different banks).

Best type of home loan - depends. Where do you think interest rates will go. Can you negotiate a good discount of the blackboard rates?

[milt1968]

I am currently a student at university. I have about 80% deposit on a good house. Am just trying to set up a rough plan for when I graduate.

I want to have a house and also another rental property ASAP.

I am just trying to find the best way to go about this.

From what I understand, if I purchase the first house with 80% deposit, the bank can usethat equity from the first place to lend on the second.

Is this correct?

Thanks for the help.

T

[Fred114]

Talk to the bank.....they will answer your question.....

[milt1968]

Talk to the bank.....they will answer your question.....

Im not going to go the effort of going into the bank when things could potentially change significantly in the next 2-3 years.

Looking for peoples opinions or experiences, as above.

[Fred114]

What is the significant change you see happening in the next 2-3 years?

[iceman]

I am currently a student at university. I have about 80% deposit on a good house. Am just trying to set up a rough plan for when I graduate.

I want to have a house and also another rental property ASAP.

I am just trying to find the best way to go about this.

From what I understand, if I purchase the first house with 80% deposit, the bank can usethat equity from the first place to lend on the second.

Is this correct?

Thanks for the help.

T

Hi milt1968.
Yes the banks will cross mortgage your 2 properties in a situation as you describe. Remember the interest on the mortgage on your rental is a tax deductible expense, but not on the mortgage on your home. So maybe worth considering all your equity being on your home and a 100% mortgage on the rental, at the outset.
Of course all subject to the banks lending criteria and your repayment ability. But your idea is sound.

I recently bought a rental overseas with a mortgage from my NZ bank secured over my home. Taking advantage (hopefully) of the strong Kiwi dollar !

[milt1968]

Thanks for the great advice iceman. Will keep doing my research and go from there. Hoping to secure a decent job ASAP after graduation. In the meantime will stick to term deposits while I learn more about different options, including sharetrading. Currently about to bury my head into "The Intelligent Investor"

[rentex]

Would also suggest talking to an accountant about structure of home/rental for tax and other purposes as you may need to set up appropriate entities before purchase. Good luck~

[fungus pudding]

Hi milt1968.
Yes the banks will cross mortgage your 2 properties in a situation as you describe. Remember the interest on the mortgage on your rental is a tax deductible expense, but not on the mortgage on your home. So maybe worth considering all your equity being on your home and a 100% mortgage on the rental, at the outset.
Of course all subject to the banks lending criteria and your repayment ability. But your idea is sound.

I recently bought a rental overseas with a mortgage from my NZ bank secured over my home. Taking advantage (hopefully) of the strong Kiwi dollar !

The mortgage on your home is tax deductible provided the money is raised to further taxable income. It doesn't matter what security is used when buying an investment property. Just make sure you get the timing right. Find a property - sign it up then raise the money for settlement using anything the bank will accept.