Don’t Listen to the TV ‘Expert’: Why Paying Off Your Mortgage is Smarter Than Earning Taxable Interest Income
By Jeff Banks
As the founder of Property Portfolio Solutions, I am writing this article with a sense of annoyance and affront towards the misconception perpetuated by so-called “experts” on television who claim to know what’s best for homeowners dealing with tough times and rising interest rates. It’s frustrating to see people (homeowners with a mortgage) misled into thinking that earning taxable interest income is better than saving non-deductible mortgage interest by depositing excess funds into their mortgage offset account.
Let me make it clear, we at Property Portfolio Solutions know that the correct approach is to let all the numbers do the talking. Inappropriate thinking that earning an income at say 2% (present deposit rates with a bank) on which tax is then paid, reducing the real return even further, was better than saving say 5% on a non-deductible mortgage is a classic example of not letting the numbers do the talking. In fact, the opposite is true – saving on mortgage interest is a much smarter financial move.
So what is the goal? If one is serious, it’s about long term financial stability and a movement towards our dreams of retirement, whenever that may be. Saving on costs allows you to accumulate wealth over time (sometimes much quicker than chasing gains) without exposing yourself to unnecessary risks or volatility. By consistently setting all your spare income and “investing” in your mortgage, you can achieve steady, long-term increased growth through the reduction in debt that is much less susceptible to market fluctuations or economic downturns.
It’s disappointing to see that many people fall into the trap of thinking short-term gains are better than long-term financial security. Instead, it’s essential to focus on your long-term financial goals and let them guide your decisions. Saving on mortgage interest is an important part of this process, as it allows you to pay off your mortgage faster and free up more money for investing in other areas of your financial portfolio.
Another important aspect of financial goal-setting is where we have shorter term goals to create a savings plan that is oriented around the segregation of multiple accounts, as allowed by most banks. This means that you can pigeonhole your savings into specific goals, such as a down payment on a house, a college fund for your children, or a retirement account. Sure you may not “earn” interest on these accounts but the savings across the board is much more significant in the overall scheme.
By setting specific goals and creating a savings plan that aligns with them, you’ll be able to achieve financial success in both the short and the long term. Remember that saving on mortgage interest is just one piece of the puzzle – it’s important to take a holistic approach to your financial planning and focus on your overall financial goals.
I urge homeowners to think carefully before taking financial advice from self-proclaimed “experts” who promote short-term gains over long-term financial security. Instead, focus on your long-term financial goals, let the numbers do the talking, and create a savings plan that aligns with your goals. By doing so, you’ll be well on your way to achieving financial success.
Ultimately, the key to achieving financial success is to stay focused on your goals and take a disciplined, long-term approach to saving and investing. By working with experts like the team at Property Portfolio Solutions and developing a solid plan that is tailored to your unique needs and goals, you can build a strong financial foundation that will help you achieve your dreams and secure your journey towards your dream outcome using property as the vehicle.
Our catchcry is “Your legacy is Our inspiration” and our approach based on what inspires you, will make your legacy seem so much easier to achieve. We are easily contacted by going to our website www.propertyportfoliosolutions.com.au where the start or even the continuation of your property portfolio is made simple.
