A key part of the success of an effective financial plan is having your lending structured correctly.
Our smarter borrowing strategies are designed to:
- Replace inefficient (non-tax deductible) debt with efficient (tax deductible) debt;
- Help you to establish an investment portfolio sooner; and
- Help you to reach your goals faster.
As part of the planning process we review your existing borrowing arrangements, and recommend strategies that are in line with your personal and financial goals.
Often a loan restructure may be recommended to allow you to use the equity in your home to acquire investments. The recommended investment loan(s) can be structured as interest only loans so that the repayments are as affordable as possible while freeing up monies that can be used to fund other components of your wealth creation plan. In addition, because you are purchasing investments that produce income, the interest cost of loans for investment purposes may be tax deductible.
Many people wait until their home loan is repaid before starting to invest. Unfortunately, this means they invest later in life, limiting the growth potential of their investments. A strategy which lets you invest now and continue to pay off your home loan reasonably quickly is called debt recycling.
Essentially a debt recycling strategy converts your non tax deductible (home loan debt) into tax deductible investment debt over a period of time. This is because your home loan reduces by the additional savings amount per week, while at the same time your investment borrowings increase by the equivalent amount each week. This strategy helps to build wealth in a tax effective manner, reducing your non-deductible debt, and assists you in paying off your home mortgage sooner.
Another strategy we apply when investing is the use of ‘dollar cost averaging’. Dollar cost averaging refers to investing the same amount each month regardless of market conditions. Over time this evens out your overall purchase price as when markets have fallen you purchase more units in the fund with your monthly investment, and when markets have risen you purchase less units in the fund with the same monthly investment. This strategy helps to reduce the risk of investing all your funds at a high point in the market. In addition, the strategy minimises the risk of a margin call by ensuring that you don’t borrow up to the maximum allowable limit.
Our mortgage broker partners are able to offer our clients the best service and available loans from all of the major bank and non-bank lenders. By working closely alongside our mortgage broker partners, our clients benefit from knowing their lending is structured correctly to give you the confidence of meeting your financial goals.
Kane Duong and Premiere Finance Pty Ltd are credit representatives of One Credit Australia, ACL No. 500069 for mortgage broking services only.