Client profile:
Paul and Mary purchased their 3-bedroom house in 2011 for $1.1M, putting down a 20% deposit of $220,000 and taking out a loan for the remaining $880,000. In 2014, Paul purchased his own business, and the couple focused on growing the business and paying down their debts.
The Allfin approach:
Paul and Mary recently decided to explore the investment property market. We arranged a meeting to discuss their options and financing strategies.
Challenge:
The couple needed to understand how they could leverage their existing home equity to finance an investment property purchase while managing their debt repayments.
Exploring alternatives:
A valuation of their home estimated the value at $2.1M. Over the years, Paul and Mary had paid off $500,000 of the original loan, leaving $380,000 owing on the property. This valuation, minus the outstanding loan, provided them with $1,720,000 in equity.
Opportunity:
We refinanced their home based on its current value. After confirming they could afford the repayments, they were able to borrow an additional $1,100,000. Their total lending amounted to $1,480,000, maintaining a loan-to-value ratio of less than 80%. Leveraging our extensive industry connections, we introduced them to a Buyers Advocate who conducted thorough research to find the right investment property.
Outcome:
The refinancing and our introduction to a Buyers Advocate allowed Paul and Mary to buy an investment property for $900,000. This amount covered stamp duty, other expenses, and surplus funds for cosmetic renovations. They consulted a Buyers Advocate who researched and found the right investment property. The additional repayments were partially covered by the rent generated from the investment property, which also has long-term capital growth potential. By taking out an interest-only loan for the investment portion, they could better manage their outgoings and cash flow while prioritising paying off their owner-occupied home loan.
Ready to explore your investment opportunities? Contact the Allfin team for your finance needs today.