Equity - how does it actually work?
What does it actually mean? What does it actually do to your borrowing power? My parents have decided to transfer their properties to myself and my brother (one each) while they’re still alive in order to assist us in getting into the housing market. I don’t know all the specifics yet, but as far as I’m aware they have around 700,000 in equity in the property they’ll be signing over to me with about 500,000 left on the loan. This means I inherit a $500,000 mortgage on a house that they will continue living in and paying “ rent” to cover the mortgage, effectively making it an investment property.
I’m 29 - make around 90k a year, I have no dependants or debts, own my car outright and am single. I’m not really sure what the equity in this house means in terms of borrowing power.
Can I pull money from the equity and use it as a down payment and is that even a good idea? Does the equity in that house afford me a greater borrowing power? My brief Google searches/ internet mortgage calculators estimate I have a borrowing power of about 350,000 without it, and obviously that means absolutely nothing in the current housing market.
i’m not looking to buy a freestanding house, more likely a two bedroom apartment somewhere inner city(ish) in brisbane/ brisbane north. there’s a fair few around the 700 to 800,000 mark, however the same mortgage calculators tell me I would have issues servicing the loan unless I was able to put down a pretty significant down payment.
Any insights, information, advice or anything else much welcome as I have no real idea what I’m doing and to be honest I never thought I would be in a position to purchase at this stage in my life. I had assumed that I was part of the money that would have to suffer a loss in the family in order to get into the housing market.