Equity looking good

Question from Murray updated on 11th July 2013:

We have our own home (QV $560,000) in Waiuku, we owe about $50,000 on it. We want to start investing in rental property, possibly in the Pukekohe area. My question is, should we wait to pay the $50,000 owing on our own home before investing, or is there a way to start now. I have owned a rental a number of years ago, but am a bit green these days.

Our expert Kris Pedersen responded:

You are in a good equity position so the main other factor that needs looking at to see if you can obtain finance is to see how your income (or serviceability in the banks eyes) stacks up. My recommendation would be to assess this first and then if okay to look to set a revolving credit facility up against your home to use for deposit funds and then look to have a second bank provide a preapproval so you have funding approval in place then to complete the purchase. In most cases recently we had been looking to fund purchases by taking 15% from the revolving credit facility and then 85% through the preapproval. With the tightening coming into place from the Reserve Bank i'd probably be setting this up with 20% coming from the revolving credit facility and 80% from the preapproval. Please feel free to get in contact to discuss further.

Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz

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