In this episode, we discuss whether using equity in your home to purchase an investment property will increase your mortgage repayments.
When you use equity frim within your home to purchase an investment property, you typically take out a separate loan against your property, which is sometimes in the structure of a mortgage top-up.
You then use this loan as the deposit for your new investment property.
Because you have taken out additional lending, there will be additional repayments against that mortgage. However, these extra repayments will be structured so they fall against your investment property.
That is because, from a tax perspective, the purpose of the loan is for the investment property and so falls within your investment property's financial statements.
The rent from your tenant will cover the majority of the rental property's expenses. However, there may be a small top-up required from the investor to make the cashflow balance.
So while you may contribute a small amount of cash towards the property as an investor, perhaps $50-$75 a week, there won't be additional mortgage repayments you have to make against your own home.
We also mention the Property Investor Quiz. This 7-question quiz will give you a 'yes', 'no' or 'maybe' answer about whether you are in the financial position to invest in property.
