Manage your home like the six-figure investment it is.
It will be a key element in your lifetime financial plan.
You've no doubt heard it all before: "owning a home is an investment in the future" or "a home loan is forced savings". In fact, owning a home can be a sound investment. Here's our five-step guide.
Step 1: Choose your home carefully
The golden rule of real estate is buy low, sell high. To do this you need to choose your investment carefully. Choose a suburb with strong capital growth, buy in the best street you can, don't overcapitalise when renovating and be prepared to stay put for at least eight years.
Step 2: Manage your debt
When building wealth, debts are as important as assets. Because your home loan is probably your biggest debt, it must be wisely managed. Monitor rates, bank fees and competitors closely and don't be afraid to switch lenders if you will save money in the long-run. Saving one per cent interest is equivalent to a one per cent increase in your investment returns.
Step 3: Use interest rates to your advantage
Low interest rates mean lower repayments. Use this time to pay more off your loan, reducing the principal and cutting your interest payments. If rates look like climbing, consider switching to a fixed term loan. But make sure the fixed rate coincides with how long you plan to stay in the property. Fixed term loans are expensive to break.
Step 4: Use your equity to build wealth
There's not much point having thousands of dollars tied up in your home if it means missing out on good investment opportunities. Mortgage redraw lets you use the equity in your home for other investments. Most standard variable home loans and some fixed loans offer redraw - as long as you have at least 20 per cent equity in your home. And because the redraw is linked to your home loan, you pay the same low rate of interest.
Step 5: Keep your home in perspective
Your home can make you money, but in the long run it should be more than just an investment. According to money management analysis group Assirt, investing in residential property returns more than a cash management account, but less than shares or property trusts. Repairs and maintenance, insurance charges, floor coverings, additions and alterations, and agents' fees all eat up an investor's money.
How your home makes you money
Home loan payments are forced savings
Capital gain is tax free
Builds financial discipline
Can use equity for other investments
Less volatile than most other investments
How your home costs you money
Repairs and maintenance, insurance and other costs
Capital gains-free status means buyers bid up housing prices
Please contact the lending professionals at APO Finance to discuss all your loan requirements.
Call 07 3387 2200 or
Contact Us by clicking here.
