Gaining equity

Question from blake updated on 21st March 2013:

I bought my house for $300,000, did renovations and got a new registered valuation for $400,000. What is the best option to get a second property? Should I sell this house and get the $100,000 or use equity to buy a second property and keep my first house and rent it out? If I use equity how do I go about this and will my bank that I have original mortgage give it to me?

Our expert Kris Pedersen responded:

Firstly you need to ask yourself a few questions, such as why you are investing in property and what do you want to achieve? Note that by selling and if you repeat this process you will need to start paying tax on the gains (seek specialist advice to learn more about this) so you need to keep this in mind when considering your options. In regards to the potential to get more finance this is very hard to say without knowing more about you. The equity side of the equation sounds fine however you will need to be able to pass the banks servicing criteria as well so I would need to understand the income and expenses side of things before I can advise here.

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

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