Usable equity

Question from Jimmy updated on 28th May 2018:

I currently reside in Australia for work purposes and I actually make great coin. But what I want to do is to start building an investment property portfolio.

I already own a home that has $120,000 in equity in it and is being rented for $320 per week. I earn $1,800-2,000 in the hand per week and I send 70% of it back to New Zealand every week. But I am constantly told that I don't have enough equity to fund an investment purchase.

Where am I going wrong? Is there something else that I am missing in this dream of owning more property?

Our expert Kris Pedersen responded:

While you have $120,000 equity in your existing property, the more important number is what amount of usable equity you have. You need to keep in mind that the banks can only go to 65% on investment lending. So, for example, if the property was worth $350,000 you are at a max lend position with them as $230,000 would be just over the 65% threshold. I hope that makes sense!

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

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