How To Pay Off Your Home Loan In 5 Years
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I’m here to talk about how you can pay your home loan off in five years. It’s a question that people ask where they say, “It sounds like it’s too good to be true.” For some, it might be. It’s not a hard and fast rule. But for a lot of you, it is a possibility. And generally, all it takes is just rejigging your figures and a little bit of discipline, and we can get an outcome which is amazing for you, to own that main residence, your main asset, free-hold, as quickly as possible. Which is great if I put my accountant hat on because it’s a non-taxable asset, which means we can’t claim a tax deduction on it. Therefore, we want to get rid of it as quickly as we can.
So I wanted to give you a real case study that we’ve had, where we’ve had a client that’s had a $200,000 mortgage. And with that $200,000 mortgage, they had a combined income of $150,000 per annum. So it was around $75,000 each, just to keep the math pretty simple. From that, on 75,000 each, the tax ends up, I’m going to round it up and let’s say it’s about 18,000. So the tax is 36,000, so therefore they’re walking away with 114K a week.
How To Pay Off Your Home In 5 Years?
Now, the trick is most people just pay the repayments that the bank tells them to pay. So, in this example, they were paying 400 a week and they had 15 years left on their term. The other interesting thing, I can’t bring up the graph for it, but if you go onto a calculator, a loan repayment calculator, you will find that the first half of your loan, you’re paying more interest and less principal than the second half. It’s funny how that works out. So anyway, 400 a week, 15 years left on their term, works out on average it’s about 10K in interest that these people are paying per annum.
So when we went through the numbers with this client, we worked out that they actually had the capacity to pay $1,000 a week. It’s just that they weren’t using their money properly. So that equates to 52,000 per annum that they could actually put into their mortgage. Now, they’ve still got to pay 10,000 a year in interest even if they do pay extra, right, as they’re paying this loan down under the old arrangement. But one of the products that we’ve got, the interest rate is 0.75%. So that means on a $200,000 loan, the interest that they’re paying for the year is only $1500. If they’re paying $52,000 per annum, well then they’re putting in $50,500 per annum into that mortgage. This means straight away, bang, their home loan was paid off in four years.
Now how do you get this interest rate? Well, generally we have to do it with property investors. So if you’re not a property investor, it’s okay. We’ve got a whole structure here where we can help you buy an investment property, which is cash flow neutral, which isn’t going to cost you anything. You get a nine-year rent guarantee, so therefore you don’t have to worry about not having income from rent, and we’ll also get the house painted for you at the end as well. And it’s in suburban locations.
So it’s pretty much as risk-free as possible. But you’ve got your house with the 200,000, and let’s say you buy an investment property because you do want to get that 0.75% interest rate. And let’s say, on this house, it’s in suburbia and it’s going to cost you zero to run. The advantage of it costing you zero to run means that all your surplus money can go into paying this off. And again, we’ve got our specialized product which allows you to have a zero-to-run, or sometimes even a cash flow-positive property, which means it’s going to make you money, which in addition can then help pay this off even foster.
Now, if we did this over, let’s say five years. Not four years, but five years. Let’s say this property grew, conservatively, by, I don’t know, 50,000. So not only has it cost you nothing to hold, it’s generated another 50,000 which grows to your bottom line. Now, the general rule of thumb is you need a rate of return of 7.2% year on year for 10 years for this $400,000 property to be 800,000 in ten years’ time. Right? So I’m being very conservative with this figure of 50,000 only beings at 1, 1.5%. So when you bundle all of this together, it’s quite simplistic. It just needs a bit of trust, a bit of confidence, a bit of courage, and this is accessible to anyone that has those attributes.