15 Mar Pay Your Home Off Faster
Would you like to have the option to pay your home off in 10 years rather than 30 years?
Live mortgage free
One of the ultimate goals for many families is to live in their home without a mortgage. The traditional method of budgeting money from a salary or wage to work towards an unencumbered home can take up to 30 years with diligence and sacrifices. The thought of getting into more debt may be the furthest thing from an owner-occupier’s mind who is trying to pay off a home loan. However, what if buying a well selected investment property could actually enable you to pay your own home off faster… much faster?
During the first 10 years of a 30 year ‘principal and interest’ loan, a borrower pays mainly interest, with the bulk of the actual principal not being repaid till the final 10 years. In good times, a borrower may even be able to get ahead on their mortgage repayments, sinking more of their hard-earned savings into the single asset of their family home.
How to pay your home off faster
Utilising equity in the family home to use as the deposit and costs for an investment property means that there is more exposure in the property market, and therefore more potential for capital gain. As an example, using $75,000 of equity to purchase an investment property around $500,000 will generate over $300,000 in extra equity over a 10 year period, at a conservative capital growth rate of 5% pa. With this extra equity, there will be a greater ability to pay down the home mortgage in a 10-year period than using savings alone. This strategy suits people on reasonable incomes who have some equity in their principal place of residence (PPOR).
So why isn’t everyone doing it? With over 10 years of helping clients to invest strategically and with less risk in property, we can put it down to three main concerns or fears that prevent people from taking action with the strategy outlined above; The new overall cash-flow position, the investment property performance and the management of the asset. Sound Property has a wealth of experience in assisting and educating clients overcome these roadblocks to make meaningful changes in their life.
With the current lowest interest rate environment in history, it may be time for families to make their equity work smarter so they don’t have to work harder! Being more active and strategic with their equity may mean they can also retire earlier, get off the treadmill sooner and achieve their goal to live mortgage free.
Contact Sound Property today to see if this strategy can help you pay your home off faster | 1300 655 899 | www.soundproperty.com.au/property-focus
This article is provided for general information only and does not constitute personal advice, as it does not take into consideration your personal circumstances. Please consult a licensed tax or financial advisor before making any decision to invest.