Having never been in the position where I’ve needed to take out a mortgage on my home’s equity in order to purchase an investment property. I would like to know how a mortgage affects the existing equity in your property. Also – what is a second mortgage and what rates are generally applied to both these types of mortgages by the banks etc?
I hope that someone is able to help me in this regard. [
]Hi Johnny,
Not sure I 100% understand your question but will take a crack at it.
A mortgage will reduce the equity in a property. A $200 000 property with a $80 000 mortgage will show $120 000 equity.
A mortgage will be about 6 – 6.5% depending on the features required. Some LODOCS will go to 7.6% or more but I do have one as low as 6.35%. I write a lot of professional package loans with a fully featured loan at around the 5.97 – 6.06% rate.
A second mortgage is pretty unusual these days. Perhaps a developer might take a mortgage over a parcel of land to 80% then will need funds to develop. He might approach a fringe type lender to fund the infrastructure with a second mortgage. The first mortgager has first crack at the security if everything turns to custard with the second mortgager getting whats left. Higher risk and pretty rare in residential investment circles these days. In fact most lenders will not consider a second mortgage.
Hope this helps.
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thanks Simon (Mortgage Hunter) for your help. Sorry I didn’t reply to your post earlier. [
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