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We have been told that our home loan is the first one we should get rid of. After all, it is the biggest debt, so it makes sense that most people want to pay it off as quickly as possible.  

But is that really the smartest way to manage your finances? Should homeowners pay off their home loan completely before considering other investments such as buying an investment property?  

For some people, this may make sense. If you want a low-risk profile, can see your income going down in the future or there are other reasons why you want to get rid of this debt, then it could be the right way to go. But when you avoid investing because you want to pay off your home loan first, you will pay a big cost.  

This is known as an opportunity cost. This is simply a way of saying – how much will it cost you to wait 10 or 20 or 30 years before you start investing? How much profit and market growth will you miss out on by waiting?  

If you bought a home in Sydney 10 years ago and waited until you paid it off before you invested in property, you would still be waiting to buy another investment. It would be at least 5 or 10 years, if not more, before owning it outright. BUT if you used some of your equity to buy an investment property 3 or 4 years ago, you would have 2 quality property assets that have both gone through a massive growth spurt. Your wealth would be greater with 2 properties than it would be with 1, even though you have more debt.  

The extra wealth of profit is the “opportunity cost” you miss out on if you wait for util your home loan is paid off.  

How Can You Safely Invest Before You Own Your Home Outright? 

How can an investor use their home equity safely, so it does not impact their lifestyle and enables them to buy a property at the same time?  

Our suggestion is that people pay off their home loans enough to be able to avoid paying Lenders Mortgage Insurance. This means you want to borrow no more than 80% of your property’s total value when you withdraw some equity to buy an investment property.  

Let us explain… say your home is worth $800,000 and your loan is $500,000. A loan worth 80% of its total value is $640,000. You owe $500,000 so you can borrow another $140,000 against your home to use as a deposit and stamp duty on an investment property.  

Here are a few tips for people who are considering this strategy: 

What Are the Traps to Know About?

Over the years we have seen a similar pattern play out in that inexperienced people don’t structure their debt correctly and end up with loan products that don’t suit them or that restrict their borrowing capacity.  

Other traps we have seen is that borrowers fall into is include using redraw, causing them to lose tax advantages, taking out principal and interest loans on an investment loan that is not tax-effective, or they don’t think about using the equity they have built on their properties to use on purchasing investment properties.  

To best leverage your loans for both your home and investment properties, it is ideal to set up the right structures and loan features from the beginning. Working with a mortgage broker and an accountant can be so powerful – it can save you from making mistakes that could cost you thousands, tens of thousands or even hundreds of thousands in lost profits, missed opportunities and unnecessary fees.  

If you are interested in property investment but don’t know where to start or whether you should pay off your home loans first, feel free to get in contact with our friendly team today and we can help look

Phone: 1300 855 022
Email: clientservices@zippyfinancial.com.au     


Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.      

About the author:       

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.       

Connect with Louisa on Linkedin.      

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).    

Disclaimer:This article contains information that is general in nature. It does not consider the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.      

It’s that time of the year again when most people embrace a fresh start. New look, new routines, new goals. But if you’re someone who likes making New Year’s resolutions, you know how hard it is to stick to them long-term. Did you know that by simply checking in and reviewing your finances, debts and insurances you could put yourself on the path to financial security?

If that sounds like too much hard work, don’t fret! With an experienced mortgage broker on your side, you won’t have to chase all of this up by yourself, as they can take care of some of the research and admin for you.

Spending just a few hours engaging in your own finances, could save thousands, even tens of thousands, each year. If you want 2022 to be a better year for your money, consider these 7 ways to get on top of your money so you can make it work hard for you.

1. Consolidate Your Debt

If you have credit cards, personal loans or car finance, you could save by consolidating this into your mortgage.

Some credit cards and unsecured loan products attract interest rates upwards of 20 per cent. Why pay these exorbitant rates when you could combine it all onto your home loan and pay just 2 per cent or even less?

Don’t forget that by adding this debt to your mortgage, you are extending the time period over which you will be paying it off and dragging this out will see the interest mount up. To really make the most of this strategy, aim to make extra payments wherever you can to get the amount you have consolidated paid down ASAP. Even small contributions, like paying an extra $100 per fortnight, selling some clutter from around the house and putting the proceeds towards your mortgage or saving all your $5 notes and depositing them into your loan each month will make a big difference over the life of the loan.

2. Review Home, Contents and Car Insurance

If you have not reviewed your insurances in a while, it is likely you are paying too much. We have a dedicated insurance broker who has a wealth of experience in securing great value policies for our clients, with affordable premiums and excellent inclusions. They will do the hard work and research to make sure you have the coverage you need and present you with quotes that work within your budget.

3. Buy a New Car

With access to more than 30 fantastic car finance options, we can get you into a new vehicle with a loan that suits your budget. Whether it is downsizing the 4WD to save on petrol costs, trading up from the old bomb that is costing you more in repairs than it is worth or using your new car purchase as a tax minimisation strategy, we can help.

4. Analyse Business Accounts and Business Bebt

Running your own business is stressful enough, without the added worry of managing all your financials and shopping around for the right bank. Let us find you the best commercial banker for your business, so you can spend time more productively serving clients, upskilling or training that new staff member.

5. Suss Out Your Superannuation

Australians are absolutely terrible at keeping track of their superannuation – the ATO reports that, as of June 2019, there was more than $20 billion in lost and unclaimed super languishing in forgotten accounts around the country!

Tracking down your lost super and consolidating it into a high-performing fund will help you minimise fees and maximise your retirement savings. While you are at it, be sure to check how much life, total and permanent disability and income protection insurance you have within your super. This way you can be assured to have enough cover if anything unfortunate occurs and that you are not doubling up on premiums or fees across several super accounts.

6. Buy that Investment Property

With the current record-low interest rates and strong competition for rental properties in our major cities, it is a great time to think about fulfilling that dream of becoming an investment property owner. It is not just an option for the rich with strong cash flow to bankroll them; the majority of Australian landlords are everyday income earners who are trying to get ahead. You may even be able to use the equity in your current home or an existing investment property to start building your portfolio today.

7. Make Much-needed Improvements to Your Home

If you are sick of staring at those out-of-fashion kitchen tiles or the kids are complaining about sharing a bedroom or bathroom, it could be time to renovate. Even a small extension or minor renovations could completely transform how you function in your home as a family, resulting in fewer arguments, better organisation and that zen-like calm we all crave when we escape back to our sanctuary at the end hard day at work or school.

Importantly, it could also add value to your asset, and you might not even need to save a cent to fund your project if we can help you access the equity in your home to cover the costs.

8. Keep Track of Your Finances using a Budget Planner

It’s easy to overspend if you’re not careful and mindful of where you’re spending your money. Keeping a budget planner handy will help you know exactly where your money is going and how much is coming in. With every credit card company offering a “buy now, pay later” scheme, it’s easy to get carried away and eventually get into so much debt. A budget planner will reveal areas where you’re spending too much and where you can cut down so you can improve your financial situation by controlling your finances instead of it controlling you. ­Here’s a budget planner template you can use so you can get started. 

Download your free Budget Planner Here.

Getting on top of your finances is not that hard after all! After a quick conversation with one of our brokers, you will be on your way to your most prosperous year yet, so contact us today.

Phone: 1300 855 022
Email: clientservices@zippyfinancial.com.au     


Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.      

About the Author:       

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.       

Connect with Louisa on Linkedin.      

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).    

Disclaimer:This article contains information that is general in nature. It does not consider the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.      

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