Loan Tip: ‘Accessing Equity’ When on a Fixed Rate Loan

Having a fixed loan doesn’t mean you cannot ‘access equity’ or borrow more money. You would be restricted to the same lender though.



Example

Homer has a main residence with a loan of $300,000. He fixes the loan for 3 years not thinking too much about the future.
Suddenly, after a year, Homer decides to buy an investment property. He was just about to pay cash for the deposit because he though being a fixed loan he wouldn’t be able to do anything much.

But Homer’s house is worth $600,000.

Homer could potentially borrow another $160,000 as a separate split – which could be fixed or variable. He can use this as the deposit and borrow the remainder secured against the new property with the same or a different lender.

 

Thanks for the tip, Terry.
Does the same apply for IPs too - access equity of an IP if the IP loan is a fixed rate loan?

 

yes

 

Thanks for this tip Terry, so for Homer to borrow another $160k, does this involve a refinance of the existing PPOR fixed loan (which would break the fixed loan)? Or do you mean take a second mortgage on the PPOR so the original fixed loan remains intact?

 

no need to refinance or touch the fixed loan. the lender will already have a mortgage too,

 

In most cases it's an application for a loan increase with the exisiting lender and new split. Pretty straightforward.