Property TV | Property Question Time – Ep 172 – Overpay or Save for a New Mortgage
Stephen Galpin: Welcome back to Property Question Time with me, Steven Galpin. Joining me today are Paul Mahoney, Mike Gray, and John Howard. Thank you gents. We’re going to go over to Paul now, in Australia, and Paul, this is your question. As it stands, I turn 27 next month, and I have 36,000 left on my mortgage. My salary is about 35,000 a year. I’ve had my house three years next month and I’ve over payed on it since I had it using my temp sent over allowance each year. I have about 12K in stocks and shares and ices and also a mutual fund for which I want to keep going. Instead of overpaying, am I better using the money and saving for another deposit and getting another buy-to-let?
Paul: Okay, well, good question and firstly, well done. You know you’ve done really well in paying down your mortgage. It’s not really an either or answer though. You mentioned about, should you pay down your mortgage or should you save that money to invest in buy-to-let. You can actually do both, and in fact, you’re probably better off doing both, because depending on the mortgage you have, the interest rate you’re paying is probably somewhere between 1 and 3%, depending on what you went for initially. And with paying that down, essentially the saving, or you can look at it as the return, on what you’re paying down per anum, is that cost of the money: the 1 to 3%. However, as opposed to putting that money in the bank, which, you know, you’re probably lucky to get one percent on it.
Now, by doing that you might feel as though you’re locking the money up in the property, or you know, by paying down the mortgage. But, in fact, what you can do is remortgage your own property to release that equity at the point that you have enough equity within the property to release and then go off and buy a property. So that’s a sensible option: pay down the mortgage, save yourself the cost. When you’ve got enough equity there, it sounds from what you said, you probably already do. You know, if you’ve only got 35,000 pounds left, I don’t know where you’re located or the value of your property in total, because you didn’t mention, but I assume you probably have enough there to remortgage now, release some equity, and go and invest. So it’s not an either or answer. Definitely seek advice on both the finance and what you should buy based upon your current situation, your goals and preferences, to actually help you get started and work toward those end goals.
Some initial points to think about: be very unemotional, don’t just buy around where you live because you know the area. Get advice and make sure you’re investing in the best possible thing for you, based upon very unemotional and commercially-minded criteria, because, remembering, property investing is all about making money. It should be looked at the same way as any other investment should be. Very unemotional, and making sure that you’re making the right decisions based upon the current situation. So, seek advice is the best way to go.
Stephen Galpin: I see. Thank you Paul, thank you very much.