Equity is the amount of money you would get if you sold an asset and paid back any money you owed on it. For example, if you have a house worth $550,000 and you owed $250,000 on your mortgage, the equity in your home is $300,000.
Such is the case of Caroline and Grant. They wish to buy an investment property using the $50,000 they have recently inherited as a deposit.
When they meet with their Mortgage Broker, Jill, to find an investment loan she suggests that they do it differently. Jill points out that all interest on an investment loan is tax deductible but the interest on their home loan is not. By paying the $50,000 inheritance off their home loan Caroline and Grant can now use the added equity in their home as a deposit for their investment property.
They still retain the same amount of debt but now the majority of it is tax deductible, potentially saving the couple thousands of dollars.
To discuss your financial needs phone Asset Wise today on 1300 666 858 or complete our simple contact form and we will return your correspondence within one business day.
Remember you don’t go to the Tax Office to have your tax done so why go to the banks to have your finances done.
