Well, buying a property for nothing is not entirely true. However, did you know that you can use equity in a property to finance the purchase of an investment property?
Depending on how much equity you have in your home, you can refinance to access this equity to cover the cost of your deposit and other fees of purchasing a property and pay nothing, or, more accurately, you don’t need the cash in the bank.
Equity is the difference between your property value and the amount you have owing on your home loan.
To qualify for an equity home loan:
In some instances, you can borrow up to 105% of the property value.
While equity borrowing can be practical and convenient, you need to be mindful and weigh the pros and cons of this borrowing carefully, as there are risks if you fail to make loan payments. Risks of home equity loans can result in extra fees and a lowered credit score.
The main risks of a home equity loan are:
A home equity loan could be a good idea if you use the funds to improve your home, invest in additional properties, or consolidate debt with a lower interest rate. However, a home equity loan is a bad idea if it will overburden your finances or if it only serves to shift debt around.