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Managing property investment expenses

24/12/2019

A handy guide for investors to manage cash flow.

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As an investment property owner it is essential to manage your expenses effectively in order to make financial gains. We’ve put together some handy steps that could help you to become financially organised and maximise the revenue from your investment home loan.

Budget

Becoming a master of your finances begins with managing your household budget. Note down how much income you receive each month and then list all your outgoings. Think about all your expenses including bills, travel, food, plus any additional splurges. Once you have outlined this, it will be easier to track your spending and identify non-essential expenses that you could cut back on. You will then be able to see how much you can set aside for mortgage repayments.

Cut your debts

Look at any outstanding debts that you have, and consider whether you could save additional money by refinancing or consolidating. Try to eliminate debts which aren’t essential or that come at a hefty cost through high interest rates or fees.

Never miss a payment

It’s essential to pay your loan on time. If you miss a payment you could be charged a late payment fee and if this is a regular occurrence it can add up to a costly affair. Missed payments can also impact on your credit rating for future loan applications. To avoid this occurring setting up a dircet debit can be helpful so you never have to worry about forgetting to make a payment again.

Top tip: Set up the direct debit to go out the day after payday, that way you can be sure there will be money in your account. You wouldn't want the debit to come out at the end of a pay cycle when you might be feeling the pinch.

Don’t just pay the minimum

If you’re looking to own your property sooner, increasing your monthly repayment to above the minimum repayment amount can significantly reduce the loan term. Some loans may charge you for making extra repayments or limit the amount of additional repayments you can make, so it’s wise to check these requirements when selecting a loan and factor in this into your decision. Generally speaking, variable home loans tend to be more flexible when it comes to making extra repayments. If in doubt ask one of our friendly home loan specialists.

Open an offset account

Opening an offset account is an effective way of lowering the interest on your home loan so you’ll be on your way to paying off your loan sooner. A 100% offset account linked to your home loan offsets the balance held in the account against the balance of your loan. For example if you have an outstanding loan balance of $200,000 and have a balance of $14,000 in an offset account, the $14,000 will be subtracted and you will only be charged interest on $186,000. This can save you thousands of dollars over the duration of your loan.

Review your mortgage regularly

When was the last time you reviewed your home loan? Is it time to refinance? It’s a good idea to review your home loan regularly and shop around to look for the best product for you. You could find yourself saving money with competitive interest rate offers and loan features better suited to your needs. If you find a more suited offer, it is a good idea to also speak with your current lender, they may be able to match or better competitor’s deals. Also, it is wise to ensure you won’t be charged any hefty fees for refinancing which may outweigh the benefits you will receive.

This article is intended to provide general information of an educational nature only. This information has been prepared without taking into account your objectives, financial situation or needs. Therefore, before acting on this information, you should consider its appropriateness having regard to these matters and the product terms and conditions. Information in this article is current as at the date of publication. Terms, conditions, fees, charges and credit criteria apply.

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