Canberra Times 6th July 2015
Leverage your mortgage
For home-owners, a standard savings plan is rarely the most tax-effective strategy, says certified financial adviser Peter Horsfield, founder of SMART Advice. Instead, leveraging your mortgage could be a much more profitable way to go.
“When you park your savings in your mortgage offset account, you’re not going to get taxed on the interest,” Horsfield explains.
“Yes, the loan will eventually go back up when you draw those funds out to pay for education costs, but in the interim, less interest payments equals more money that you can use to reduce your overall debt.”
For instance, a $600,000 loan at 5 per cent would cost $30,000 annually in interest. With $100,000 in an offset account, you could save $5,000 in interest (untaxed profits), an amount that could be used to reduce your principal to $595,000.
“This is one of the most suitable strategies for parents, particularly now that deducting school fees is no longer a fringe benefit deductible employer expense,” Horsfield says. “It’s a simple way that people can accelerate their debt repayment, and know that they can access that money again for expenses such as private education.”
For more read the full article: http://www.canberratimes.com.au/brand-discover/scroll/goinvest/education/