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home loan

You’ve have heard people talking about paying off their home loan in under five years and asked yourself can it actually be done? But the banks and lenders like us to have our home loan for a 30-year period so they make a lot of money on the interest of the home loan don’t they!?

Correct – the banks will not teach you how to pay off your home loan in five years as yes – it doesn’t work for them. Now this where a good strategy comes into play and if you learn how to build a property portfolio maximising the equity and profits allowing you to buy and sell property within your portfolio – you can pay off massive chunks of your home loan and aim to pay your home loan off in five years. So YES it can be done!

home loan

To pay your home loan off in five years or under – you must start to invest, you have to be a use other people’s money IE, the banks. This is sometimes hard for people to understand as you are getting into more debt to pay off old debt. However the debt you’re going into is investment debt which is tax deductible and free from the Australian taxation law (good debt). Now the type of property you buy is very important so that you are able to force equity and profits from the property. Because if you are buying a property that’s not going to increase in value and allow you to make profits then you definitely shouldn’t be investing in that particular property.

home loan

So let’s start with a scenario where you have your owner occupied property that’s worth $500,000 and you have $300,000 debt on that property which you want to clear within five years. So to pay off $300,000 over five years the standard way would be to pay $60,000 dollars extra off the loan every year. That means slaving at your job needing $100,000 plus income a year to roughly pay off $60,000 of debt on your owner occupied home. However you still have to live and pay your current mortgage payments, the weekly groceries, electricity, rates, school fees, private health insurance etc etc so being able to save $60,000 on top of this is very difficult even impossible for the every day Australian.

home loan

Now how about the smart way? If you do look at buying a duplex or an advanced strategy property where on completion of that property you might have $100,000 worth of equity or profit. If after selling the property and paying out the tax that you owe on the profits and covering the costs on the property such as stamp duty legal fees etc let’s just say your left with $70,000. Wouldn’t this be a much smarter way to invest.

Now what you do with the $70,000 profit is repay that money off your $300,000 loan. You then continue to repeat the same system to pay down that debt over a period of up to 5 years. You now have your own occupied house repaid in zero debt owing to the bank.

home loan

You must have a plan and a strategy in place if you are going to invest in property otherwise you’re likely to be in more debt and not paying off any of your owner occupied debt. I know this blog post is a very brief overview of advanced strategy investing – however if you would like more information contact Blue Wave Property Strategies for more information and book in your free wealth creation appointment by clicking the “free consult” button on the home page.

Looking forward to working with you!