When considering financing the deposit and stage payments for an off plan purchase or the completion in an emerging country that is not offering mortgage facilities then equity release could be a viable option.Using the term in its broadest sense it is the release of the equity that is locked in an existing property either because it was originally purchased in cash or it has accumulated in value over time.
Although in some countries the term equity release may indicate a specific type of product the principle remains the same, i.e. releasing equity.
In a rising property market the latent value inherent in the property could be considerable and this makes it ideal to be released and utilized for the next investment.
Many successful investors have used this principle to build property portfolios over previous years.This is done by either a re-mortgage (because there is an existing mortgage in place) or a new mortgage (on a debt free property) then using the cash released to finance the new investment.
Current value of property - current loan commitment = Accumulated equity
There is potentially $175,000 available to invest in another property or properties if creating a portfolio. This simply means investing in a number of properties rather than just one. They do not all need to be in the same development or even country so it allows the investor to spread the investments
Across different market places, thereby taking advantage of different growth rates and spreading the risk of those investments. In other words the investor is not relying solely on one development to be successful. Using the example above:
Our investor releases 80% of the $175,000 equity available = $140,000 for further investment.
4 properties are identified :
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