A $1.45 million restructure to fund the next investment property
A couple ready to buy an investment property, with the deposit sitting in their home equity rather than their savings account. Plus a complication: company directorships.
The situation
Our clients were a couple preparing to buy an investment property. Both are PAYG employees with solid incomes, and their home had grown in value, leaving plenty of equity. They wanted three things from the one restructure: a better rate on their existing home loan, $30,000 for home improvements, and $210,000 to cover the deposit and purchase costs on the investment property.
The sticking point
Both clients are also directors of startup companies. Directorships matter to lenders: even when you're not relying on the company's income, a lender wants comfort that the businesses you're attached to won't become your problem. Startup companies, with their short trading histories, get a closer look than most.
What we did
We arranged letters from the companies' accountants confirming that each entity trades profitably and has sufficient recurring income to meet its ongoing debts. That gave the lender what it needed to assess both applicants on their PAYG income alone.
From there, we refinanced the home loan away from their existing lender to a better rate, structured the $240,000 equity release, and secured pre-approval for the new investment loan.
The result
Total lending of $1.45 million, all under 80% LVR, so no lenders mortgage insurance anywhere in the structure. The renovation funds and the investment deposit are ready, and with pre-approval in place they can make offers knowing exactly what they can spend.
Using equity instead of savings
You don't need cash savings to buy an investment property if you have enough equity in your home. Releasing equity through a refinance can cover the deposit and purchase costs, so the investment property is fully financed. The discipline that matters is LVR: keeping the combined lending at or below 80% of property values avoids lenders mortgage insurance and keeps the overall position comfortable. That's what shaped the numbers in this case.
Equity and investment lending, answered
Yes. A refinance or loan increase can release equity to cover the deposit and purchase costs, so the purchase doesn't need cash savings. Lenders assess the combined position, and keeping total lending at or below 80% LVR avoids lenders mortgage insurance.
Lenders look at any company you're a director of, even if you don't rely on its income, because company obligations can become personal ones. Evidence that the entities are self-supporting, such as accountants' letters confirming profitable trading and sufficient recurring income to meet ongoing debts, usually resolves it. It's about presenting the application properly, not a barrier.
Pre-approval confirms your budget before you commit, which matters even more when equity release and multiple loans are involved. It also means formal approval is faster once you've found the property.
Thinking about your next investment property?
Shane will map out what your equity can do and structure the lending so the purchase actually happens.
This case study describes a real loan we arranged, anonymised. Every situation is different and past results are not a guarantee of what a lender will approve for you. The information on this page is general in nature and does not take your objectives, financial situation or needs into account. See our disclaimer for more.