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Mortgage Reduction using our expert investment
property advice...
...can save you money and years off your mortgage!
In my discussions with the many professional money people
that I have spoken to over the years, I have discovered that the majority
of the people they talk with, have a common interest.”How
do I pay my home loan off sooner?“
The best possible way to achieve this and in the shortest
possible time is to use all the financial tools we now have available
today through the purchase of an investment
property .
The first place to start is to get the right loan
product for our home loan which allows us to pay off as much
principal as quickly as we like and without penalty. As we all know we
have no tax benefits associated with the interest paid on personal debt.
So wouldn’t it be nice to find a way to get rid of this debt as
quickly as possible. This will save us massive amounts of dead money paid
in interest and quickly create equity in the home property for
further investment if so desired
The second step is to set the investment property
loan product in conjunction with our home loan. What this will
enable us to do is capitalise the interest on to the investment
property portion of the loan facility and allow all the income
to go to reducing the principal amount of the home loan portion.
Let me explain.
(1). When setting up an income producing
investment we have tax benefits provided to us from Mr Rudd. All costs
associate with an income producing investment are entitled
to tax deductions at our highest marginal tax rate.
These benefits include any cost that is not a government charge, and include
any loan setup costs, interest charges on the loan, depreciation on the
fixtures, fittings and building, insurance and management fees etc.
All these tax benefits can be sourced through a form called
a 15/15 tax variation schedule and allows our annual tax assessable income
to be reduced by the amount of the tax benefits and thus reduces the tax
we will pay each pay day, therefore adding sometimes hundreds of dollars
to our pay depending on the amount of the benefits. This extra money should
be applied to reducing the home loan.
(2). Rental income from the property.
Also applies to the home loan.
(3). Don’t forget about the regular
income. If we have all our pay deposited to our home loan account and
set up a credit card with a direct debit to be paid before the interest
free period expires, we will also benefit by paying interest only on the
reduced amount until the card is paid, as the loan work by charging interest
on daily balances. So the more days in the month we can reduce the principal
amount the less interest we will pay.
If we follow this investment
property strategy you won’t believe how quickly we can pay out
our home loan. Getting the right loan product is of the utmost importance
and we should consult with a lending professional to ensure that we get
the best product at the best rates. At the time of writing information
re tax benefits is correct.
The addition of an investment property can
have a dramatic effect on the time that it takes to pay out your home
mortgage. With an extra $1800 or more ( tax breaks and rental income ),
on top of your salary offsetting your mortgage each month disciplined
budgeting is not quite as critical.
Using your investment property as a mortgage
reduction tool is a simple process once set up correctly by a
finance specialist.
Our referred finance specialists will take the time to
explain to you how a mortgage reduction system works so you can make an
informed decision as to whether it will benefit you.
The key principle of Mortgage Reduction is that
"Interest is calculated on the daily balance". Therefore,
the day-to-day balance of the mortgage account has a significant impact
on the interest charged to the loan and therefore the term of the loan.
The word Mortgage is actually a concatenation of two French
words: the word Mort which means "death" and the word Gage which
means 'pledge". So in effect, a mortgage is a "death-pledge".
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It has also enabled us to reduce our home loan by $23,000 over this
past seven months.... 
~ Warren & Debbie Eggleston
