So with all this going on, let us look at the many ways you our clients can benefit from the low interest rates. Here are my major four:
1. Reduce or clear any debt which is not your mortgage
The golden rule, when you have any surplus income, is to pay down the most expensive debt first. An example is credit card or personal loan debt due to the fact that the interest rates are higher on products such as these.
2. Principal reductions off your mortgage
A great time to reduce your mortgage – this could yield very significant savings in the long term along with creating more equity in the property.
3. Putting a toe in the stock market
We all know that the stock market has taken a pounding over the last couple of years, and whether you want to dip a toe into its choppy waters depends on your own feelings about its fragility. With property trending as per the figures above, wise investments in this arena could be an option.
4. Why wait all year to claim deductions – go to your planner/mortgage broker
Investors often look forward to tax time, and many losses from holding a property including interest rates, rates, repairs and maintenance, property management fee and depreciation deductions. Instead you can nominate to do a PAYG withholding variation via your tax accounts based on an anticipated loss. This is a tax variation and the tax lodgement at the end of the year is still required. This improved cash flow can be used to be your Christmas Account to plan holidays, or can be directly used towards reduction of your debt.
No matter which path is taken planning becomes the catch phrase – and savvy structuring and positioning for the future can be taken advantage of in this lending environment. Working with a client to assist in the best structure prepares the prospective/ existing mortgage holder for unexpected turns in the market, which inevitably will come.