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It could be used as a holiday home or as an investment property to create a passive income. Either way, there are many advantages for buying a second property.

The next question is how will you fund this purchase? There are three options which are currently popular choices for borrowers:

Save Money: This is probably the option most people think of straight away. It is simply about saving enough of your own money for a deposit. Borrowers may lean towards this as they may have used this option for their first property or they may not have enough equity. If you do not have enough equity from your previous property, the lender will need to see that you have been able to save 5% of the purchase price over a minimum of three months.

Equity: Equity is the difference between the house value and the amount you owe. So, if your house is worth $500,000 and you owe $200,000 you have $300,000 in equity. For those who have had first property for several years, if the value has gone up and you have paid off part of your loan, the equity would have increased.  In addition, people that choose to pay more than the minimum required payment also increase their equity.

This equity can then be used as a deposit for your new property by either redrawing out a deposit or using the equity as security for the new loan. With the equity and value of the new house combined, lenders may be able to offer 100% of the purchase price.

Self-Managed Super Fund: There are several benefits for using your self-managed super fund to purchase your next property. A major benefit is that you have financial control of your superannuation.  You are able to select your investments and make adjustments to their portfolio to match the changing property market.  In addition, you are able to use both the rental income and super contributions to pay the mortgage. You need to get financial advice from a qualified financial adviser who can also assist you when considering to take up the State Custodians Self-Managed Super Fund loan

Although owning two properties opens up a lot of possibilities, remember that you need to be able to meet repayments; otherwise you will be in hot water. If you would like to discuss your options further, please give State Custodians a call on 13 72 62 and our credit managers can give you the tips and advice you need to make the right choice.