Unlocking equity then selling

[salt]

Hi, I've got a quick question about repaying a refinanced homeloan.

If I we were to use our properties equity as a deposit on another investment property, then go on to sell the first property, would the proceeds first have to go back on to the remaining loan amount? Or would we be free to use any profit for further investing and just continue to service the loan as normal?

Thanks

 

[tobe]

if you got $40 from cashconverters for your guitar, would they expect $40 back before they let you redeem it?

Yes, if you were to sell that first property, the lender would expect the loan repaid in full that is secured against that property.

 

[bumskins]

Hi, I've got a quick question about repaying a refinanced homeloan.

If I we were to use our properties equity as a deposit on another investment property, then go on to sell the first property, would the proceeds first have to go back on to the remaining loan amount? Or would we be free to use any profit for further investing and just continue to service the loan as normal?

Thanks

The loan has been created with your property as security. So when you dispose of the property, there is no longer any security against the loan.

So you must clear the loan first (pay back all debt), whatever money is left over you are free to do with what you please, invest, holiday, etc. If you want to reinvest into another property then a completely new finance application needs to happen.

Just remember selling is a Capital Gains event, so there may be tax to pay.

If the first and second properties are cross-collateralised, then yes the bank may force you to pay down some of your second loan.