Should I payoff my home loan or invest?

To pay more off your home loan or invest in another property?

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.

To understand more your options, book a chat with us today.

Read on to discover some key factors to consider before deciding what’s suitable for you.

How much do you owe on your home?

If you have a significant balance on your home loan, you may need to delay plans for an investment property.

If your mortgage exceeds 80 per cent of your home's value, consider focusing on paying down your loan to increase your equity, which is the difference between your property’s value and your 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 on non-essentials and want to channel extra funds into your home loan,
• 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.

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

Before making financial decisions, consider your long-term goals. If your priority is becoming mortgage-free, consider paying off your home instead of investing. However, if you aim to build wealth, investing in property might be a better option.

It’s a good idea to speak to a mortgage adviser like us about the best big picture financial strategy for you.

We can suggest ways to pay off your home loan sooner or line you up with the right investment loan for your needs tailored to your goals.

Our team is here to guide you every step of the way. Book a 10-minute chat or give us call at 1300 780 440.