Refinancing an Investment Property
Refinancing an investment property could be a good option for you if you’re looking to access funds to purchase further investment properties or renovate your existing portfolio. Investment property refinance options provide different ways to access equity that your property has accumulated.
At Australian Credit and Finance, we understand how important property investing is to Australian’s, and recognise that this is a popular asset class, which is why you might want to continue expanding your portfolio.
Many Australian’s see property investing as a way to achieve financial independence and we agree, which is why our Home Loan Experts can help you with your refinancing options.
Why Property Investment?
Did you know that buying an investment property has more advantages compared with investing in other assets? Here’s why:
- Good properties are hard to find, so there’s a limited supply – particularly in well-established suburbs
- The property market is relatively stable – good properties that are in high in demand still do well, even when times are tough
- Lenders look favourably on investing in property, which means you might be able to borrow higher amounts
- You can access both rental income and capital gains, which can help pay off your mortgage faster or access equity to invest further
Why Refinance Your Investment Property?
While buying an investment property is often a good strategy, coming up with the funds to buy further investment properties can be tough, particularly if you already have a home loan to pay off as well.
This is where refinancing your existing investment property to get into more investment properties is a good idea. This is a solid investment strategy to increase your portfolio without having to come up with any further funds.
You could literally only ever have to come up with one deposit and then simply use the equity (capital gains) built up in your investment property to buy the next one, and the next one and so on. It’s easy to see why so many Australian’s favour property investing as a vehicle to achieving financial independence and security in retirement.
Let’s look at an example of how this might work:
Jennifer owns an investment property worth $600,000 and owes approximately $300,000, which gives her $300,000 in equity.
Jennifer decides after chatting with her financial planner and doing some research that she wants to buy another investment property. She refinances the existing investment property to gain access to the $300,000 equity.
With this amount, Jennifer buys a new investment property and uses the rental income she receives from it to pay for the mortgage.
You can see how easy it is to get that next investment property by refinancing your current one.
What risks are associated with refinancing your investment property?
Refinancing is a great way to access equity and purchase more investment properties, but it isn’t without risk.
Here are some of the risk when refinancing to buy more property:
- If the property you purchase drops in value, you still have to pay the mortgage
- If the property doesn’t cover your mortgage repayments, you will need to top this up with your own money
- If tenants don’t look after the house, you could be forking out to have things fixed
- You can’t access profits in your investment property unless you sell it or borrow against it
- Refinancing can have costs associated with it, so make sure you know what these are before you start the process
Investment property refinance is a great way to go if you’re looking to access funds to grow your portfolio or increase investment property values. Talk to our experienced team about refinancing investment property options today.