Taking advantage of the financial times
With everything that is happening and changing around the world, one of the things most experts agree on that won’t change, is low interest rates. Knowing this should prompt you to ask some of these questions, if you’re looking to maximise this period of access to cheap capital:
- Should I refinance now?
The short answer is YES. If you have been with your current lender for more than 3 years, chances are you can unlock significant savings by simply refinancing your home loan with the same lender or shopping around and finding a cheaper rate.
One of the best ways you can do this is to compare home loans online via one of the many services that allow you to compare the best rates side by side.
- How much equity do I have in my home?
Knowing how much equity you have in your home is important because it can allow you to use that equity and access to cheap capital to do a few things, one of them being paying off smaller, higher-interest debts you may have, for example a credit card, personal loan or car loan. These other loans are typically on interest rates of 10-20%, where as refinancing them into your home loan can allow you to pay them off over a longer period of time at a lower interest rate. This then adds more cashflow to your weekly budget and allows you to actually pay off the loan faster.
- Should I consider using my equity to buy an investment property
This is obviously a much bigger decision than just refinancing or consolidating debt, but if you have enough equity in your home you can use that equity to borrow against and buy an investment property. Depending upon the property purchased, the loan, the rental return and the geography, could actually NET you cash in your pocket over and above the repayments. This is due in part to the current climate of low interest rates. This is called ‘cashflow positive’ property investing.
With interest rates at a historic low, plus the added state and federal government tax incentives that come with investing in property, the climate is right for Australian’s to really take advantage of securing their financial future.
The market isn’t slowing down either. All of the Australian big four banks are predicting an 10%+ capital growth rate for Australian properties.
One of the many strategies that Aussie investors use with cashflow positive properties, is to re-invest the extra income back into their original property, creating more equity and reducing the debt faster. This is not a new strategy, but one that many a property millionaire has deployed to see them build their property portfolio.
- Will the property bubble bust?
The property market has performed surprisingly well in early 2021, avoiding the drastic 40 per cent plunge some experts predicted in early 2020 when COVID-19 was seen as its apocalypse, but there are still questions being asked.
When will the boom stop?
Australia’s biggest bank believes the housing market is on the cusp of a boom.
Commonwealth Bank (CBA) forecasts dwelling prices will rise 8% in 2021 and 6% in 2022, with house prices to rise 16% in that time and unit prices by 9%, evidencing the disparity in the sectors.
- Are all the conditions right?
It’s hard for even a conservative investor to say NO. It seems all the conditions are RIPE!
- Cheap loans
- Growing housing market with all four major banks predicting double digit capital growth
- Increased rental demand
- Australia seen as a safe haven for overseas migrants, only adding to the rental demand once boarders open.
These factors alone seem to be the writing on the wall for most investors to get started and due their due diligence.
If you are considering investing in property, before you leverage your family home, of course it is best to consult a licensed financial adviser to help you make the right decision based on your circumstances, budget and financial planning goals.