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 of the key considerations to think about before deciding what’s suitable for you.

How much do you owe on your home?

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.

If your mortgage is more than 80 per cent of the current value of your home, it may be worthwhile working towards paying down your home loan and increasing your equity. Equity is the difference between the value of your property and the loan balance.

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.

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.

If you owe your lender less than 80 per cent of your property’s value, you may even be able to use your equity as a deposit to buy an investment property.

Consider your Superannuation as an investment strategy

Another option is contributing to your superannuation. With concessional tax rates on contributions, this can be an effective way to build wealth for retirement, particularly for those concerned about their long-term financial security.

Determining what’s right for you

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.

It’s a good idea to speak to a financial adviser or accountant about the best big picture financial strategy for you.

And when it comes to the finance side of things, we’re here to help. We can suggest ways to pay off your home loan sooner or line you up with the right investment loan for your needs, depending on what you decide.

Get in touch today!

Inflation seems to be headed in the right direction, but Reserve Bank of Australia Governor Michele Bullock says a near-term cash rate cut isn’t on the cards.

So, where does that leave homeowners wondering whether now is a good time to refinance?

The decision as to whether to refinance depends largely on your individual situation and goals. Here are a few key considerations to think about when deciding whether or not to refinance.

The latest inflation data was promising

In case you missed it, the consumer price index (CPI) rose by 1 per cent in the second quarter of 2024, bringing annual headline inflation to 3.8 per cent.

While this was above the March quarter figure of 3.6 per cent, an important measure of underlying inflation (the trimmed mean) declined for a sixth quarter in a row, signalling inflation is still trending down.

The Reserve Bank of Australia (RBA) wants to get inflation within the 2 to 3 per cent target range, which looks likely to happen towards the end of 2025.

At its latest meeting, the RBA board decided to leave the cash rate on hold at 4.35 per cent. However, Governor Michele Bullock has since indicated a near-term cut in interest rates wasn’t on the cards.

So, should I refinance now or wait it out?

Without a crystal ball, it’s hard to know exactly when the RBA will cut the cash rate. However, refinancing may make sense if you fall under any of the following categories.

You’ve been with the same lender for a long time

Refinancing can be onerous, but it could be worth the effort. If you’ve had the same home loan for several years, chances are you could be getting a more suitable offer with another lender.

You’ve never heard of a redraw facility or offset account

Certain loan features and tools may help you reduce your interest and get ahead, so it’s worth considering refinancing.

With a redraw facility, for example, you could make extra repayments on your mortgage and reduce your interest, but still access funds should you need them.

An offset account, on the other hand, allows you to deposit money into a transaction account that’s linked to your mortgage. Deposited funds are offset against your loan balance, reducing your interest.

Your situation has changed

Have your financial circumstances changed since you took out your original home loan? If so, all the more reason to consider refinancing to a home loan that marries with your current financial situation and long-term objectives.

Your debt is feeling unmanageable

If you’re juggling multiple debts at once, such as a personal loan and credit card debt, it may be worthwhile considering debt consolidation.

With debt consolidation, you essentially roll all your debts into your home loan. It means you only have to make one repayment, making it easier to manage your debt.

It’s important to remember that you may end up paying more interest over the life of the loan if you go down this road, so speak to us and we’ll crunch the numbers for you.

You want to access your equity

Want to make a big-ticket purchase, like buying an investment property or doing a home renovation? Refinancing can help you achieve these kinds of goals.

Like to know more?

We can help you work through all the options out there and find you a home loan to suit your specific circumstances and goals.

Get in touch today.

With today’s cost of living pressures and the median dwelling value in Australia now at $794,000, many young Australians feel like they’ll never be able to enter the property market.

However, it’s important to remember there’s no one-size-fits-all approach to buying your first property. For some, it could be a home to live in. For others, rentvesting makes more sense as it can offer a great alternative to get a foot up on the property ladder.

What is rentvesting?

Rentvesting is when you rent where you want to live and buy where you can afford.

By rentvesting, you can earn an income from your rental property, pay off the mortgage and potentially cover the costs of owning the property, all while continuing to live in a suburb you enjoy.

Why do people choose to rentvest?

One of the biggest motivators of buying an investment property is the potential to make a return via capital growth. This is when your property increases in value over time.

If you’re positively geared (that is, the rental return is higher than your home loan repayments and other property expenses), a rental property can also offer you an additional income stream.

Another reason people choose to rentvest is that it’s another way to enter the property market, without having to purchase a home to live in. Maybe you’ve grown fond of your inner-city apartment (that’s unfortunately out of your price range) and don’t want to move out to the “burbs”? With rentvesting, you can own your own slice of real estate where you can afford and still have the flexibility to live where you want to live.

What to know before going ahead with rentvesting

1. Potentially smaller deposit, but fewer government perks

If you choose an investment property that’s more affordable than the home you intend to live in one day, your deposit will be smaller. It might be easier to save a deposit if you go down the rentvesting route.

However, because you’re an investor and not a first-home buyer, you won’t benefit from government schemes such as the First Home Owner Grant and First Home Super Saver Scheme, which would only apply if you were living in the property.

2. There are ongoing costs to factor in

If you’re rentvesting, you’ll need to budget for all of the costs associated with owning the property (e.g. the mortgage repayments, management fees, rates, water bills, maintenance, insurance, and strata levies if it’s under a body corporate scheme).

Keep in mind, the rental income may cover some, if not all, of these costs. You’ll also need to cover your own rent too.

3. Investor loans could come with higher interest rates

As a rentvestor, you will have an investor loan. These typically come with higher interest rates than owner-occupier home loans.

This means your mortgage repayments may be larger than if you were living in your own home.

4. There will be tax implications

At tax time, your accountant will ask for information about your investment property, including the rental income and expenses (most of which can be claimed as tax deductions).

Your accountant can guide you about the tax implications of owning a rental property, such as the potential for capital gains tax (if your property goes up in value) when it comes time to sell.

Like to know more?

If you want to get started in the property market sooner rather than later, rentvesting could be the way to go.

To explore your finance options, get in touch. We’ll help you work out whether rentvesting is right for you.