Mortgage Debt Reduction

Do you want to save money and take years off your mortgage? Yes, it is possible!

Using investment property advice tailored to your financial situation by our investment property specialists, we can show you how to pay your home loan off sooner. Now that is something we should all be interested in!

Purchasing an investment property and using all of the financial tools available today will help you to pay your home loan off in the shortest time possible. The first step in this process to find the correct home loan product that allows payments toward reducing the principal of the loan as fast as you like and without being penalized.

There is no way to make interest paid on personal debts - i.e. a home loan - a tax deduction, so it is in your best interests to get this paid off fast! It could save you thousands of dollars in dead money and also allows you to create equity in your personal property for future investment if you wish.

Next, you need to find a loan product in conjunction with your current home loan, which is suitable for purchasing an investment property. This will facilitate the capitalization of the interest on the investment property part of the loan, and enable all of the income to be paid off the principal amount of the home loan.

Tax Benefits

The Australian Taxation Office (ATO) currently provides tax benefits for establishing an income producing investment. All costs and expenses incurred when establishing and maintaining an income producing investment are classed as tax deduction at the highest marginal tax rate. The tax benefits associated with this include: a) Any cost or expense that is not a government charge; b) Any costs associated with setting up the loan; c) Any interest charged on the loan; d) Any depreciation in value on the fixture and fittings of the property; e) Any costs of building insurance; and f) Any management fees i.e. by a rental agent.

Applying the Benefits

These benefits can be claimed by completing and lodging a Form 15/15 Tax Variation Schedule with the ATO. Essentially, this form allows for any of the above tax benefits (a - f) to be applied against our annual taxable income, and accordingly, reduces the tax that we pay i.e. tax taken out of a weekly or fortnightly pay packet. Depending on your income and the tax benefits taken advantage of, this could potentially add hundreds of dollars into your pay. Any money saved through tax benefits, should be directly applied to your home loan in an effort to reduce it further. Every dollar counts!

Any rental income earned from leasing out the investment property should also be applied directly to the loan.

Your trusted information

Ensuring that your regular income is also deposited directly into your home loan account is another fantastic way of reducing interest payable. How this works is:

Have your pay deposited into your home loan account.
Attach a credit card to your home loan account and use it in the place of cash or eftpos.
Pay off the credit by direct debit before the interest free period expires.

Interest on your home loan is calculated on the daily balance of the home loan. Therefore, by having your pay deposited directly into the loan account reduces the principal and accordingly, reduces the interest amount calculated.

By applying these investment property tips and mortgage reduction strategies, you can dramatically reduce the time it takes to pay off your home loan. Of first and foremost importance is ensuring that you get the correct loan product and you should always consult a lending professional to be sure that you are getting the best product at the best rates. At the date of writing, all information regarding tax benefits is accurate.

By adding an investment property to your assets, you can considerably cut down the time it would normally take to pay out your home loan. You can offset your mortgage each month by combining the increased income, derived from tax breaks and rental income (which could potentially be around $1,800) with your normal salary and in turn your life becomes easier because strict budgeting is not as critical.

If the loan for your investment property is correctly set up by a finance specialist, then using it a mortgage reduction tool on your home loan is a simple process. Our finance specialists can make it easy for you to make an informed decision about how a mortgage reduction system could benefit you, by taking the time to explain all you could need to know and answering all of your questions.

The key to reducing your mortgage is to remember that interest is calculated on the daily balance of the investment property loan. Accordingly, monitoring and making every effort to reduce the daily balance of the mortgage will have a significant impact on how much interest is charged on the investment property loan and in turn, how long it is going to take you to pay it out.

Interestingly, “Mortgage” is a connection of two French terms – “Mort” which translates into English as “Death”, and “Gage” which translates into “Pledge”. Ironically, your mortgage is actually a “death-pledge”. Let us help you take control of your finances and don’t let a “death-pledge” get the better of you!