First Home Buyer Home Loan

Using Your Home to Build Wealth

If you have your own property, you can use its equity to buy another property that you can rent to others. This way, you can build your wealth with passive income. This rental property can help provide investment security through income and capital growth.

Properties for investment can also give tax advantages so that you won’t have to solely rely on negative gearing and depreciation by the end of the year. However, you must talk to your financial adviser first before deciding on this strategy.

If your property has substantial equity, you may use this for investments as soon as you like. You may increase this amount further by trimming your debt and increasing the property’s equity through renovation and construction. These construction jobs can boost your property’s equity.

This equity can then be used in various ways such as the purchase of a car or the renovation of a property. You may also use the equity to build your investment portfolio to enrich your lifestyle. Despite the increase in the funds that you can use, you must still employ financial discipline and use funds within your means.

In order to build on equity, you must wisely choose the property that you will invest in. You must employ the golden rule in real estate which is to sell high and buy low. Therefore, choosing a property in an area of steady capital growth will work to your advantage. Once you have pinpointed this area, you must find the best street in this area and find a property where you will stay quite a few years.

You can also build on your equity if you will treat your debt as if it were an asset. You home loan is the biggest debt that you have and proper management of it is needed. Allot some time in monitoring bank fees and rates and go for refinancing if you thing that another deal will give more savings in the long run. A savings of one percent is equal to a one percent investment return.

You must also device a plan so that interest rates will be your ally. Lower interest rates translate to lower repayments and therefore, you must trim the principal amount of your loan more in times of low interest rates by making extra repayments. In times of potential high interest rates, you may transfer to a fixed home loan.

Once you have substantial equity, you must use it in making other investments. You may also use the redraw facility of your mortgage if you have at least 20 percent of the property’s equity. The amount that you can get from the redraw facility can be used to pay low interest rates.

And last but not the least, investing in residential properties will give more income than a cash management account but it offers lower profits than property shares and trusts. Therefore, treat your home as a sound investment and do everything that you can, whether it is renovation or construction, to increase its stock.