Calculating equity

Our Experts Answer:

Firstly, note that there will be other criteria outside of your equity position that you will also need to satisfy. But, based on the information that you have provided, you have $80,000 of unutilised equity when looking at bank criteria (and non-bank options may enable you to push further).

The way to look at this - from a bank point of view - is as follows: Your personal home can be leveraged to 80% which is $400,000 and your rental property can be leveraged to 70% which is $280,000. These figures combined are $680,000 which, when you take the $600,000 total mortgage figure away, leaves $80,000 which you can use for further deposit funds.
If you were to purchase another rental this would give you a maximum purchase price of $267,000. To calculate this, you take the $80,000, then divide by three and times by 10 which shows you how much the $80,000 as a deposit will give you.

I presume you have both of your existing properties with the same bank. If this is the case, if you look to purchase a new property they are going to assess both of your existing properties at 70% of their combined values or $630,000. This would only leave you a $30,000 deposit for the purchase of a new home. But if they are currently with different banks there may be other options. Feel free to get in touch to discuss further.