Property Rich by Melissa Opie

Author:Melissa Opie
Language: eng
Format: epub
ISBN: 9781742468075
Publisher: Wiley
Published: 2010-10-28T00:00:00+00:00

Using your savings instead of borrowing

Remember in the last chapter we told the story of Diana and Lou, the couple who made all the wrong moves when it comes to structuring their home loan? You might recall that one of the mistakes they made was sinking their extra money into their investment loan instead of on their own home loan. It's a mistake because interest on the loan for the investment property is tax deductible while interest on their own home loan is not.

The same principle applies to saving. Saving is a great and admirable thing to achieve, although, from an investor's point of view, there are good and bad ways to spend it.

You should try to eliminate using your own cash for your investment property deposit, and any other associated costs — whether it be property management fees or property maintenance, to name a few.

In the case that you have equity built up in your own home, cash savings are best directed towards this home loan, which, as mentioned, is ‘bad' debt because it is not tax deductible. Alternatively it could be directed into an offset account linked to your home loan.

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