The 40s are, for many people, a critical decade for building wealth. Income is usually on the rise, but so are expenses such as mortgages and school fees. Juggling priorities can be a real challenge, and mistakes made in this stage of life can have a large bearing on your future.
Investing in property can be a good way to get ahead in your 40s and, believe it or not, it can even help pay down your mortgage sooner.

How can that be?

Home ownership is the Australian dream and a personal milestone. It can mean financial and physical security for your family. It is only natural that most Australians probably want to repay their mortgage as quickly as possible.

Homeowners can exercise a variety of strategies to repay their home loan faster. Some increase the size and frequency of their repayments, others split their loan to take advantage of flexibility and certainty, and if there are lower interest rates than they are currently paying, others have a finance check every two to three years to take advantage.

One strategy that is not often discussed is leveraging an investment property to repay your family home loan.

There are a range of property investment methods that can be used to repay a mortgage. But key to all of them is understanding your objectives, timeframe and structuring your debt appropriately.

If repaying your home mortgage is your chief focus, then it doesn’t make sense to pay principal and interest on both properties – particularly when you can gain tax benefits for interest payments on your investment property.

Instead, many property investors with a home loan set up their investment property through an interest only loan.

By doing this, the repayments should be smaller each month. When you also claim the interest paid on the investment property as a tax deduction, you may find further financial gains.

Most investment properties start as negatively geared (the cost of ownership is more than the income). However over time (and this is typically years and over a full property cycle), your piece of real estate should eventually turn into a positive cash flow property. The additional cashflow can then help you chip even more away from your mortgage.

The longer you hold your investment property the more likely it will become positively geared. So by investing in property in your 40s – while you have a good income, home equity and serviceability – it may set you up for a more financially secure future (and less financial stress) in your 50s.

Eventually, if you’ve chosen an investment property in an area that is set for growth, you might decide to sell it. Whatever profit you make (after paying capital gains tax) could be put towards paying down your home mortgage. Or, depending on your financial situation and long-term goals, expanding your property investment portfolio.

Feel free to reach out and have a discussion about borrowing to start or expand your property investment portfolio.