logo

Blog

22/09/2020

Pay Off Mortgage Sooner With Investment Property

The jubilation of buying your first home is undeniable. The time it takes to save up for a deposit, find the right property and sign the paperwork is considerable, yet the reward is great. The time it takes to pay off the remaining mortgage is often even more considerable and the rewards here are slim.

Most people have 30 years’ worth of mortgage payments to consider when they buy their first house, and this can be stressful. Pillar Financial can help you leverage investment properties to pay off your home mortgage faster than you believed possible. We have written the following as a general guide. As always, please seek professional advice when making investment decisions.

Paying off a mortgage early results in many benefits. You will save money on interest payments that you would otherwise have to pay, you are able to spend more time with family and you are able to put more money into savings, travel more or invest in your future. All of these reasons and more are why consideration should be given to utilising an investment property portfolio to assist you in settling personal debt with your bank or financial institution more rapidly.

You may receive advice from any number of sources regarding best practice in paying off your mortgage. In many cases, we find these sources to be older, having bought property in a market characterised by different conditions.

Many baby boomers and Gen X-ers bought property in their 20s, for example, and still had many working years left to invest in other property after they paid their first mortgage off. However, in the case of Gen Y, Z and millennials, investing in a property portfolio earlier may allow you to see returns sooner and pay off your mortgage early.

The logic behind buying several investment properties is that the value of these investment properties increases with time. The potential growth achieved can then be used to pay off some or all of the debt against the family home. Even in a poor growth market, negative gearing can be used as a strategy to reap back losses on property via tax incentives. Australian market regulations provide a great environment for investing in a property portfolio.

Consider the following scenario:

You have purchased your home, valued at $600K. By investing another $500K in an investment property, assuming the investment property doubles in value in approximately ten years, you can leverage the growth on this property to pay off your home – in part or entirely. Considering a mortgage of $400k on your home, and assuming you can reduce the debt on that by $100k in 10 years, the above scenario is very doable.

During the journey, you could also leverage any growth on your family home to purchase a 2nd investment property thus doubling your ability to create value through growth.

Developing an investment strategy should always include ways to pay off the principle place of residence (ie. your home) faster. You will then have better cashflow with which to grow an investment portfolio, improve your lifestyle, travel, and be better prepared for retirement.

If you’re ready to start your journey towards paying off your mortgage using an investment property portfolio, contact the team at Pillar Financial today. We’ll be more than happy to assess your situation and rapidly provide investment options designed to free up your finance, reduce stress and pay off your mortgage quicker. Call us on 1300 730 309 between 9:00 and 5:00pm Monday to Friday for a confidential discussion about your financial situation.