Join our investing community

Pay off mortgage and investment loans?

Discussion in 'Money Management' started by bonkerrs, 28th Jan, 2011.

  1. bonkerrs

    bonkerrs Active Member

    Joined:
    26th Jul, 2007
    Posts:
    25
    Location:
    Sydney NSW
    Just did a budget summary on our financial situation. I wanted to get some opinions on what I should do.

    Details:
    • I have a mortgage and an investment loan so I pay 2 lots of interests, 1 not tax deductible (mortgage) and one is (investment loan).
    • I have an offset acct and a share portfolio.

    I’ve worked out that if I sell my share portfolio and utilise my offset funds to pay off all loans (mortgage and investment loan) I will come out slightly ahead.

    My question:
    Should I pay off everything and be slightly ahead... Or pay of the mortgage only and keep the share portfolio and keep paying the investment loans (tax deductible).

    I would appreciate any comments on what to consider in making a decision to go one way or another.

    Cheers, Ben!
     
  2. samaka

    samaka Well-Known Member

    Joined:
    30th Sep, 2007
    Posts:
    308
    Location:
    Sydney
    How old are you? Are you intending to retire soon?

    This really depends on what stage you are in life. If you are still young with many years of working in front of you, you can continue to invest with debt for (potentially) greater returns down the line.

    If you simply want to clear out your debt and live a cash-flow positive life, then go for it.
     
  3. builder2818

    builder2818 Well-Known Member

    Joined:
    31st Dec, 2008
    Posts:
    89
    Location:
    Sydney
    It depends on your investment strategy - if you never pay off the investment property, the rental income should cover the interest payments (hopefully you got an IO loan for it) and you can invest in more property down the track utilising the equity that has hopefully accumulated - this being a long term strategy relying on capital growth, plus you get the growth that comes from your share portfolio - two long term sources right there.

    Or you payoff and accumulate funds for further investing from rental income - probably not the best tax effective strategy as you'll be paying tax at your top marginal rate.
     
  4. bonkerrs

    bonkerrs Active Member

    Joined:
    26th Jul, 2007
    Posts:
    25
    Location:
    Sydney NSW
    Thanks for the reply. Definitely something to consider. My portfolio isn't looking the best so it may be time to sell up and be completely free for a little while. Yes, still young so I have a little time to consider the next moves! Thanks again.