In most instances, you need a 20% deposit to get a home loan to buy an investment property.
Therefore, if Sarah uses $80,000 worth of equity as a deposit, she could purchase a $400,000 investment property – assuming she covers stamp duty and settlement fees with money she’s saved, and she meets the necessary criteria to get the loan.
It’s possible to buy an investment property with a deposit lower than 20%, but you’ll most likely have to take out Lenders’ Mortgage Insurance (LMI). This means you’ll probably have to pay an additional fee (approximately 2 to 3% of the loan amount), and your interest rates on the investment loan may also be higher.
When it comes to your usable equity and borrowing power, a Home Lending Specialist can talk you through the possibilities.