CPG

I think you would agree that living mortgage free is the ultimate dream for most Australians these days. The truth is, however, that the majority of home owners in Australia have to spend 25+ years repaying the bank until they can make that dream a reality. The good news is that you don’t have to wait 25 years to pay off your mortgage. You can own your home outright much faster with some smart planning.

The most challenging way to reduce the lifetime of your mortgage is to pay it back early by making larger payments out of your own pocket. Sounds good in theory but the trouble with this method is that it has an impact on your weekly pay packet and can hurt. A lot.

The majority of people don’t have that much spare income every month to clear the mortgage out of their salary. While it pays off your home faster, it also means compromising in other areas of your life to get it done.

Wade and the team have helped hundreds of Australians realise their financial dreams. Wade reveals for us how easy it really can be to live the ultimate dream of being mortgage free AND financially secure.

Mortgage Free in 3 Easy Steps

So, we are just going to come straight out and say it. You’re no doubt dying to know the secret to the easy way to pay off your mortgage sooner. The best part is it’s much less painful on your finances and lifestyle than you’re probably thinking. The secret is to use investment properties to pay your mortgage for you. Here’s how:

With a small deposit, buy a rental property with a tailored mortgage package
Rent the property out to tenants
Each month the tenant pays rent. That rent pays the mortgage on the rental property and also leaves a small surplus which you can use to pay off your home loan

If Australia’s property market continues to perform as it has, the rental property itself gains equity value as the market appreciates. Let’s assume that this equity appreciation was roughly 5% a year (a reasonable assumption based on history). Then you have an ever-growing sum that you can realise when you sell the investment property.

With the right formula, you should have enough profit to pay off your mortgage in just ten years! Thanks to the rent and the equity increases and assuming you buy an investment property of similar value to your own home. You will find that it would take roughly 10 years before you could sell the investment property and realise enough profit to pay off your mortgage.

Of course, at that point the big question will be, do you want to sell at all? You see by this time, you’ll have paid off a big chunk of your home loan and will see how property actually performs. You may even have brought another rental property or two, allowing you to pay down your home loan sooner.

Most of our clients build a small portfolio in a 10 year timeframe because they see the benefits and understand it’s really very simple, when investing in the ‘right’ kind of property. You can’t just go out and buy any old property and hope for the best – there is a strategy behind it all.

In 10 years your rental payments are going to be higher than the mortgage payments giving you more money to direct in to your home loan.

That’s right, you’ll be able to pay the mortgage off early and when you do – you’ll have two homes (or more). One which continues to create income for you in perpetuity and another which you can live in without worrying about the bank’s share because you will have paid the mortgage off early.

Did you find this article about becoming mortgage free helpful? Here are some other articles about investing and purchasing property that other readers have found helpful:

If you would discuss your personal situation with Wade or one of our team, then please feel free to call our office at (08) 6323 2306 or lodge an enquiry on the ‘Contact Us’ page on our website