What would your budget look like without a home mortgage payment included?
Interesting thing is, you don’t have to consign yourself to 30 or 40 years of payments...it’s possible to pay your home loan off much more quickly than that.
All it takes is a bit of planning and smart money management.
Sometimes it’s hard to take the long view...we live in the present...so it’s easy to dismiss or forget that our mortgage is accumulating interest while we’re paying it off.
What your loan is really costing you
So let’s have a look at an example to highlight what you’ll gain from paying early...besides the money regularly leaving your back pocket.
Loan amount - $300,000 at 7% interest
Payment - $2,000 monthly
Interest repayment (30 years) - $415,000!
If you paid your loan off in 15 years, here’s what would happen.
Loan amount - $300,000 at 7% interest
Payment - $2,000 plus $700 monthly
Interest repayment (15 years) - $185,000
Savings - $230,000 less in interest!!
So you’re thinking, “There’s no way I can find an extra $700 in my budget...I’m doing good to pay all of my bills now!”
Perhaps, but if you’ve got some financial inefficiencies you might find another $500, more or less, in your current budget.
In fact, about 95% of people we’ve worked with had financial inefficiencies when they first came to us. Our mentors help their clients find and resolve those money issues, freeing up more cash for wealth creation.
Okay, so let’s say you’ve met with one of our coaches and you’ve been able to free up $500 monthly via budget tweaks, tax benefits, etc.
That’s a fantastic start and will go a long way to paying your home off faster.
But we can do even better...without adding more stress to your already busy life.
Make a plan
Boost your payoff even more - add more money to your offset with the addition of investment property income.
Here’s an example of the tax benefits available to investors:
As you can see, your home isn’t really doing anything for your financial bottom line, however when you throw investment properties into the mix, suddenly you’re saving thousands of dollars...money that can be put to use paying off your bad debt (home loan) and building up your wealth.
Of course there are a lot of variables to consider when using these strategies, so it’s important to understand what is right for your particular situation.
For example, you would think that it’s a good idea to cash out your offset account to pay your home loan off in full...but that isn’t always the case.
To learn more, put yourself and your future to the top of the queue and come along to one of our Property Investor Nights. These FREE exciting events are jam-packed with timely, actionable information designed to help you achieve financial freedom for yourself and your family.
Sam Saggers is CEO of Positive Real Estate and Head of the buyers agency which annually negotiates $250 million-plus in property. Sam's advice is sought-after by thousands of investors including many on BRW’s Rich 200 list. Additionally Sam is a published author and has completed over 2000 property deals in the past 15 years plus helped mentor over 2200 Australian investors to real estate success!
Read more expert advice articles by Sam
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
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