Pay Off Your Home Loan Before Buying Another Property? Think Again!

For property investors and homeowners in certain situations, one of the most important goals might be to eliminate any debt that they have accrued through home loans. Getting out of the negatives is certainly important, particularly for investors, but the best answer may not be what you think. Most people plan to pay off loans and debts before moving on to the next property, but it may actually be a better strategy to invest in and buy another property beforehand.

Buying New Property Before Removing Debt

Leverage

One of the advantages to buying another piece of property before you finish paying off your home loan lies in the fact that you can use your current property as leverage. Over time and through various circumstances, the value of the home may increase, thereby allowing you to sell it or use it as an asset when investing in another house.

There are things you can do to increase a property’s value to promote this scenario as well. It is not a guarantee of course, but if the value rises enough, you should be able to sell off one property for a more lucrative one.

Into the Positives

Another strategy is to focus on boosting positive gains rather than trying to minimise negatives ones. It’s simple math if you think of it that way: rather than paying off a loan to get rid of it, by boosting your positive gain, the debt won’t matter as much.

By investing in another property before you fully pay off your home loan, you can reap the financial gains of the other property (by means of rental income and capital gains) to make a profit and later pay off both debts. This is an effective strategy, but not without risks as well, as most investment ventures tend to be.

Investment Strategies

Before you finish paying off a home loan, it may be a good idea to invest in another property. By using the increased value of the first home and income from your investment properties, you will surely make a stronger profit and remove all debt in time, placing you in a stronger financial position.

To learn more about investment and real estate in Geraldton, call (08) 9301 4445.