A fully-paid off home of your own is the most valuable asset you can have when you enter retirement. However, reaching this goal needs planning and a disciplined strategy.

Home ownership is a life goal for many Australians. The large up-front cost – which can now be up to 10 times your annual salary – means a big mortgage has to be taken out at the start, and paid off over 25 years or more. The interest you pay for the use of this loan is huge, and it is a burden that you carry for most of your working life.

The fastest way to reduce the total interest paid, and to get the home paid off faster, is to increase the repayments beyond the minimum. The mortgage on your private home is not tax-deductible, so you are paying the full interest rate, with your own hard-earned after-tax dollars. Increasing the monthly repayments therefore gives you an excellent return, particularly when combined with the capital growth of the house itself.

To reach retirement free of your mortgage means you have to contribute more than you are required to do. Aside from reducing the lifetime interest of the loan, and paying it off quicker, the growth in equity in the home allows you to use the savings as a deposit on investment properties.

The interest on an investment property loan is tax deductible, so we generally recommend to our clients to pay the minimum required into the IP loan, and the maximum possible into paying off their family home loan. In addition, the tenants and the taxman contribute most of the monthly holding costs to the investment property rather than you.

To discuss how you can develop a strategy to reach retirement mortgage-free, and to find out how investment property can accelerate the achievement of this goal, contact us on (02) 9687 3601 or email us on info@mccarthygroup.com.au