Question from Tom updated on 5th July 2012:
I currently have two rental properties with one bank and wish to buy another. My net borrowing is 80% of market value with most of the equity in one property ($100,000) and only $10,000 in the other. What can I do to gain access to this $100,000 equity? Or is there perhaps a better way to go around acquiring my third property other than trying to free up this equity?
Our expert Kris Pedersen responded:
Banks are always going to require that some of that equity left in. Based on what you have said I am picking that your portfolio is worth $550,000 with $440,000 of debt. Some banks will look at lending between 85% to 90% for a further purchase so as long as you meet the servicing criteria you should have a pretty good chance of borrowing further. Note however, that some banks may now limit you to 80% meaning that you may need to change banks to access further funding.
Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz