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PPG_Blog_image 2_using equity to invest in property

Property, especially in Australia’s capital cities, remains a financially rewarding investment in the long term with houses doubling in value roughly every 10 years. Astute investors do their research, locating well-positioned properties in areas where there has been proven rental demand and lifestyle value.

With record-low interest rates, both owner-occupiers and investors have been competing to get a piece of the property market action.

If you are in the market for an investment property, having an existing mortgage, especially if it is for the home you live in, is highly regarded by lenders. It is also provides the opportunity to use your existing equity as a deposit for your investment property.

Equity – the difference between the value of your property and the amount you owe on your mortgage – can be a powerful tool for building real estate wealth. To access any existing equity will involve refinancing your mortgage. Why not take the opportunity to look at your mortgage options and compare rates.

If the amount of interest you pay on your investment loan, together with property maintenance costs, is greater than the income you receive (rent), your property is considered to be negatively geared.

This difference can be used as a tax deduction, For example, if your property generated $20,000 in rental income, but the interest repayments and other tax-deductible maintenance costs were $30,000, you are able to reduce your taxable income by the difference – $10,000.

If you are looking at refinancing to create an investment property portfolio, always base your loan repayment calculations on conservative figures to ensure you can cope comfortably with an interest rate rise of two to three per cent above the current rate.

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