What’s going on guys It's Jordan de Jong here and today I want to talk about how to calculate your borrowable equity, this is something I struggled to figure out how to calculate when refinancing my first property to buy another investment property, so I want to demonstrate to your guys how to calculate it in this blog. There are many different types of equity, equity growth on an individual property, the total equity in a property, the total equity in your portfolio, but today well be covering borrowable equity. Borrowable equity can be described as the property’s value multiplied by the percentage amount that a lender is comfortable to lend (typically 80 percent, as this is the amount you can generally borrow without the need for mortgage insurance), minus whatever you owe against the property. So essentially, borrowable equity is how much we can pull out of a property to either use as a deposit for another property or sit it there in an offset account as a cash buffer for the worst-case scenario, and have it there freely available to use it when you need to. (Current Market Value x Lender LVR) – Outstanding Debt = Borrowable Equity The calculation method for a property’s total borrowable equity looks like this, where we take the current market value, times it buy the lenders LVR they are happy to allow you to borrow, and minus the result by the outstanding debt amount and before we go into a working example don’t forget to smash that like button. $500,000 x 80% = $400,00 So let’s take a current property that is valued at $500,000, we’ve talked to our lenders and they are happy to lend us up to an 80% LVR, so we avoid paying lenders mortgage insurance altogether, if we multiply these values together, we can calculate what our new debt amount would be at $400,000. And that’s a good point to remember, by using the equity in your property, it’s going to increase your total loan amount and you will be paying interest on the additional borrowed monies. $400,00 - $294,000 = $106,000 We also owned this property for a few years and have managed to pay the existing mortgage down to $294,000, so we take our new mortgage amount the lender has approved at $400,000, minus our existing outstanding mortgage at $294,000, giving us a borrowable equity calculation of $106,000. Once all the paperwork has been finalized, we can sit this $106,000 in an offset account that’s attached to our existing mortgage, and the best part about this is we don’t have to pay any additional interest until we actually start using that money. As always, seek your own professional financial, legal, taxation & property investment advice for your current situation, these videos are just my opinion and general in nature and should never be considered personal advice. Until next time, happy house hunting.

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