22 Oct Should you pay down your home loan or invest in another property ?
To pay more off your home loan or invest in another property? It’s a question many homeowners face.
Ultimately, it depends on your financial situation and long-term goals as to whether you funnel your funds into your home or an investment property. Here are some considerations to think about before deciding what’s suitable for you.
The case for paying down your home loan.
There are all sorts of benefits to making extra repayments and paying off your home loan sooner. For one, you’ll pay less interest over the course of the loan, while at the same time increasing your available equity. You may even use your available equity to do renovations on the property and increase its value.
You may consider paying down your home loan if you:
· Tend to spend money on things you don’t need and want to ensure you put any extra funds towards something useful, like paying off your home.
· Are close to retiring and still have a way to go to pay off your mortgage.
· Hope to release guarantors on your mortgage. or
· Want the peace of mind of being debt-free sooner rather than later.
Remember, if you do focus on paying off your home loan before investing, you can always revisit property investment down the track. It also pays to keep in mind that there may be limits on how much extra you can repay on your home loan in a given period, so ask your lender for clarification.
The case for investing in property.
Some people decide that investing in property is more important to them than paying off their mortgage faster. How much do you owe and do you have enough equity? If you still owe a fair amount on your home loan, you may need to put plans for an investment property purchase on ice, at least for the time being.
There are many perks of buying an investment property.
· Some people go into it for the capital growth – the potential for the property’s value to increase over time.
· Others invest for the rental returns or for the tax benefits – seek tax accounting advise.
· Wealth accumulation for retirement – maybe explore SMSF property investment option.
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It’s important to consider what your long-term goals are before deciding what’s right for you. If your priority is to be mortgage-free rather than taking on more debt, you might decide not to invest and to pay off your home instead. But if you’re looking to channel your extra money into a prospective wealth-building asset, you may consider buying an investment property.
Get in touch today to discuss your home loan finance options!
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