Can I use equity in my apartment to buy a house?

Any general questions you might have in regards to loans and finance.
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stace
Posts: 64
Joined: Wed Jun 24, 2009 4:48 pm

Can I use equity in my apartment to buy a house?

Post by stace »

Hi home loan experts,

I need bit of information from you regarding home loans. I want to know about using equity in another property. I have an apartment worth $260,000 and the balance on my loan is $185,000. My annual salary is $80,000 and my wife earns $75,000. We want to buy a house around $400,000.

I wanted to know if I can take loan using the apartment that I currently own. I would be grateful if anyone could give me relevant info on this.

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Otto Dargan
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Re: Can I use equity in my apartment to buy a house?

Post by Otto Dargan »

Hi and welcome to the forums stace.

You may be able to use the equity in your current property to purchase another property. Due to the flexibility offered by this kind of loan, they have grown in popularity recently. One of the flexibilities that such a loan offers is its size. You may be able to use the amount that you require, and will be paying interest only on what you have borrowed.

Since you bought your apartment some time back, you already have around $75,000 in equity. It is possible for you to use that equity to buy the house that you want.

Home equity loan also has flexibility behind the purpose of the loan. You may be able to get such loan for :
  • Buying real estate, a business, or cars and boats.
  • Investing in a business, or in stocks, shares, and funds.
  • Renovation.
  • Debt consolidation.
  • Holiday, wedding, or medical expenses.
  • Emergency funds.
Since you may be allowed to consolidate your debts, you can bundle all your expensive unsecured debts and pay a single monthly instalment. Since interest rate on credit cards and personal loans can be as high as 30% and 15% respectively, you may be able to save a huge amount in interest when you consolidate these debts into your home loan.

However, there may be downsides to home equity loans. You are usually offered a Line of Credit, which means that you will be allowed to use your loan as a cheque account. You may have to pay a higher interest rate than that of a standard home loan. If you are not prudent in using money, you may lose the entire equity in your existing property.

We have a few lenders on our panel that can accept your equity to purchase another property. We'd need to order a valuation to determine exactly how much your property is worth as lenders require valuations from their team.Would you be happy for me to do a full assessment on your situation to see if you qualify for those lenders?

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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stace
Posts: 64
Joined: Wed Jun 24, 2009 4:48 pm

Re: Can I use equity in my apartment to buy a house?

Post by stace »

What are the costs associated with that? I do not have much funds to spare! Also, could you explain a bit more about line of credit? I am not entirely sure what that is.

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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: Can I use equity in my apartment to buy a house?

Post by Otto Dargan »

Hi stace,

For us to do an assessment for you is completely free of charge and obligation free. We can be reached on 1300 889 743 or you can fill in our free assessment form to see if you qualify for a loan or not. If you would like to know more about anything related to home loans then you can check out our website.

Answering your other question, a line of credit allows you to have some freedom with your mortgage. If you are cautious with your finances then you may be able to enjoy several benefits with a line of credit such as:
  • You may be able to withdraw up to your credit limit without an approval from the lender.
  • The credit limits are quite large significantly.
  • You are generally offered a lower interest rate than those on credit cards.
  • Since this facilities offers cheque books, internet banking, phone banking, and other useful transactions, you can have easy access to funds.
  • Your other debts such as personal or car loans may be consolidated into your mortgage.
  • You can reduce the loan balance and be able to save on interest by directing your income into your home loan account.
However, due to the risks associated with a line of credit, it is better to seek independent advice from a financial adviser on whether or not to choose a line of credit.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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stace
Posts: 64
Joined: Wed Jun 24, 2009 4:48 pm

Re: Can I use equity in my apartment to buy a house?

Post by stace »

Thank you for the information, Otto. I have just filled up your assessment form and will be looking forward to hearing from you.

deedee
Posts: 44
Joined: Fri Jul 26, 2013 7:06 pm

Re: Can I use equity in my apartment to buy a house?

Post by deedee »

Hi there,

I came across the term “cash out” while researching home equity loans. Could someone tell me more about that?

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Otto Dargan
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Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Can I use equity in my apartment to buy a house?

Post by Otto Dargan »

Hi deedee,

Cash out is the term used to describe a borrower releasing the equity of their property using a home equity loan. This means that the funds can be released directly to the borrower when their loan is refinanced. Lenders are wary of cash out because they do not have any control over how the funds are used once the loan is advanced.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

deedee
Posts: 44
Joined: Fri Jul 26, 2013 7:06 pm

Re: Can I use equity in my apartment to buy a house?

Post by deedee »

Hi Otto,

Thanks for the prompt reply. I am still not so sure about the difference between an equity loan and cash out. I will call you guys directly to clear up my confusion.

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