How to reduce your home loan interest rate to as little as 1.25%
Published 10:05 am 20 May 2019
DG Institute founder and CEO, Dominique Grubisa explains how you can get your home loan down to as little as 1.25%, and potentially maximize your tax efficiency on your investment properties.
Having facilitated loans for hundreds of our students, we have grown our finance arm to an entity that contends with the biggest loan writers in Australia.
What that means is that we see the best deals, we get the best turnarounds a month, and we can go out there and seek the best opportunities for you.
One of those that we’ve got is specialist accreditation that only a few people in Australia can write loans for is what I call the loan controller.
What that is, it’s a product with an ATO ruling. That means the tax office has signed off on this product and said that it is okay to balance out your home loan debt, and set it off against your investment property.
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So, let me explain how that works;
What it does is it takes home loan debt, because we all know your home is not an asset. It’s not an asset that can be negatively geared and that can work for you effectively. So just remember that the debt on your home loan is not a debt that’s tax deductible, whereas negative gearing, it’s a ruling from that taxation office that provides that when you buy an investment property costs and expenses related to that are tax deductible.
They did that, and they brought that policy into reward and encourage investors because they’re good for the economy financially it was thought. As they’re providing accommodation for people, and building, and construction, and there are jobs there.
How to reduce home loan interest rate to as little as 1.25%
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So, economically, they were rewarded by the Australian Taxation Office by being allowed to claim anything they spent on their investment property, and that included interest. So the cost of borrowing the money to be able to own that property was tax deductible.
So if you’re interested in negative gearing now’s the time to be buying property, in case that law changes. On the flip side, when you buy, and even if you’ve got investment properties now you need to restructure that debt.
Because the loan controller product says if you’ve got a home loan, let’s say you’re paying 4% interest on your home loan. Let’s say you’ve got an investment property, and you’re paying a bit more, 4.5% interest on that debt. What the loan controller does is it looks at the ratios, case by case, but it says that you can pay as little as 1.25% on your home loan. So you take that dead money, the interest from say $2000 a month down to $800 a month. That’s the only dead money that you lose, that $800. The rest of it, $1200, comes across to a higher interest rate on your investment property.
So, say you were paying two and a half thousand dollars a month interest on your investment property, you’re now paying say $3700 a month. That full portion is tax-deductible. That’s what the ATO has said is fine. That tax ruling says that if you set up the loan controller at any time up until 2020 what it means is you will be able to claim that deduction forever. Meaning, if you’ve got an investment property now, and you refinance with the loan controller, your home loan debt is right down, your interest on your debt is more, and all of that is tax-deductible.
What that means for you is you can vary your tax situation, you can have more in your pay package every month. Or you can claim it at the end of the year as a tax deduction.
It is massive if you have an investment property or you’re thinking of buying an investment property. It can save you tens of thousands of dollars or more per year.
Lawyer, Asset Protection Specialist and Property Educator
Dominique Grubisa is a practicing legal practitioner with over 22 years of legal and commercial experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author. You may contact Dominique at firstname.lastname@example.org
This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.