Can You Use Home Equity Loans for Investing in Real Estate?

Recently updated on October 16th, 2023 at 12:36 pm

If you’re exploring the world of real estate investment in Australia, you may be wondering whether you can leverage your home equity to finance your venture. Home equity loans can indeed be a valuable tool for those looking to dip their toes into the real estate market or expand their existing property portfolio. In this article, we’ll break down the ins and outs of using home equity loans for real estate investment in simple terms, so you can make informed decisions tailored to your financial goals.

What is a home equity loan?

Essentially, a home equity loan is a type of loan that allows homeowners to borrow against the equity they’ve built up in their property. Equity is the portion of your home’s value that you truly own, calculated by deducting your outstanding mortgage balance from the current market value of your home. With a home equity loan, you can access this equity in the form of a lump sum or a line of credit.

Can you use a home equity loan to invest?

Yes, in Australia, you can use a home equity loan to invest. The borrowed equity can be used for various investment purposes, including real estate investment, investing in shares, starting a business or other investments. Here’s how it works:

Let’s say you own a home with a current market value of $500,000, and your outstanding mortgage balance is $300,000. This means you have $200,000 in home equity. With a home equity loan, you can borrow a portion of this equity, often up to 70%, depending on the lender’s policies. In this case, you could potentially access up to $140,000 to fund your real estate investment.

Benefits of Using Home Equity for Real Estate Investment

There are several advantages to using a home equity loan for real estate investment:

  • Lower interest rates: Home equity loans typically come with lower interest rates compared to other types of loans, making them a cost-effective financing option.
  • Quick access to funds: The application process for a home equity loan is often quicker and more straightforward than other loan types. This allows you to secure funds promptly.
  • Tax deductibility: In some cases, the interest paid on a home equity loan used for investment purposes may be tax-deductible, which potentially reduces your overall tax liability.
  • Flexible repayment options: Home equity loans offer flexible repayment terms that can be tailored to your financial situation.
  • Leveraging your assets: By tapping into your home’s equity, you can leverage your existing assets to create additional wealth through real estate investments.

When is it possible to sell your house after obtaining a home equity loan?

There isn’t a specific timeframe dictating when you can sell your house after securing a home equity loan. However, it’s important to note that when you decide to sell, paying off any outstanding liens is a standard procedure. This requirement is because your home serves as collateral for the loan, but it doesn’t imply that you must delay the sale.

Furthermore, you may also need to consider various factors, such as loan terms, market conditions, financial goals and prepayment penalties. Consulting with a financial advisor or real estate professional is recommended for an informed decision.

Key takeaway

Using a home equity loan for real estate investment in Australia can be a smart financial move when approached with careful planning and consideration. Before diving in, it’s crucial to assess your financial situation, evaluate the potential risks and have a solid investment strategy in place.

At Mango Mortgages, we understand the importance of financial flexibility when it comes to real estate investments. That’s why we offer home equity loans with loan terms ranging from 2 to 24+ months Australia-wide, without the need for a credit check or income assessment.

We pride ourselves on transparency, providing clear information on fees, charges, interest rates and additional costs for late repayments. With our quick funding availability, typically within 3—5 days from application, we’re here to help you unlock your real estate investment potential. Apply online here.


Mango Credit

Yanis Derums is the Founder and Director of Mango Credit– a leading private lender specialising in bridging loans for personal use and business short term loans for commercial and/ or investment purposes. Yanis has extensive experience with financial analysis, credit assessment, product structuring, and general business management

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