How using equity works Real Estate Gold Coast

Many investors use the equity in other investments (including their own home) to purchase more investments.

Let's look at a simple example of a position

Total Investments	Total owed	Equity in $	Owed as a %	Equity as a %
$500,000	$300,000	200,000	60%	40%

For example sake lets say you would like to buy another investment for $300,000
Rather than use your savings for the deposit and buying costs you prefer to borrow all costs and the full purchase price using the equity you have in your investments.
The cost of the investment is $300,000 and you have $12,000 in buying costs

Total Investments	Total owed	Equity in $	Owed as a %	Equity as a %
$800,000	$612,000	188,000	76.5%	24.5%

Some people like this as it is a way to have a $300,000 investment working for them without finding the intial deposit and buying costs.
With TOTAL BORROWINGS UNDER 80% no mortgage insurance is payable.

So what happens if the investment they wish to purchase is $500,000 with $25,000 in costs which puts total borrowings over 80% which won't mean the financial institution won't lend the money it just means mortgage insurance of around another $20,000 needs to be added to the costs.

Total Investments	Total owed	Equity in $	Owed as a %	Equity as a %
$1,000,000	$825,000	175,000	82.5%	17.5%

What's possible is to have 2 seperate loans one