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Investing

If you own a property in Sydney or Melbourne, chances are, it’s increased in value considerably during the past couple of years. With your newly gained equity, you’re now a whole lot richer – at least on paper. You will either need to sell it or take up a new loan to unlock the equity. By taking up a new loan against your property, you could use it to purchase an income producing asset and start building your property portfolio. So, just to explain this easily: Current property value: $600,000 Mortgage: $300,000 Equity gained: $600,000-$300,000= $300,000 In theory, you...

So, what’s the next step after paying off your mortgage after all those years? Research shows homeowners celebrate their financial freedom, then develop a new set of money goals.  It’s quite common for people who have paid off their homes to invest in property again. But first – there’s the holiday or well-earned break. After all, a mortgage term is a lengthy one. Property is still popular as we can touch it opposed to shares. With historic low interest rates, many are keen to invest in property while others like to invest in...

So, what is negative gearing? If you buy a house that makes more money (in rent) than it costs (in repayments and expenses), then you can say it's 'positively geared'. So your mortgage is paying itself off. But if the rent doesn't cover the costs, then you can claim that loss on tax (negative gearing). In the 2012-13 tax year, the average loss on an investment property for negatively geared investors was about $10,000. You can reduce the amount you can be taxed by $10,000. So if you're earning $90,000 per year, the amount you pay tax on is $80,000. There's quite alot more to it from a taxation point of view including if you pay more than interest on the loan (so some of the principle loan) this can't be claimed. We also have some clients that are a little surprised as they have been paying off as much as they can on their loan.