If you have been a homeowner for a few years, chances are the value of your property has risen whilst your mortgage has reduced. This equity in your home is a potential gold mine.
Have you ever thought about how you can make the equity in your home work harder for you?
How you ask? It’s easy! The strategy is called debt recycling.
Agreed, the strategy is not for everyone, but in the right circumstances it can considerably increase your wealth over the long term by increasing your exposure to growth assets and of course the income those assets create.
Many people have taken this opportunity but before you jump into the strategy, answer the following questions:
- Do have at least a ten-year time horizon?
- Can you manage your debt and resist the temptation of easy access to cash?
- Does the household have a stable income to maintain a secure financial position?
- Are you willing to invest in growth assets that may fluctuate in value over the short term?
If you answered “YES” to them a debt recycling strategy may just be right for you.
A gearing strategy is not for short-term speculation but can be an effective one for long-term investment in quality growth assets.
Advantages of a home equity loan include:
- A simpler application process.
- Lower interest rates than on other loans.
- Interest costs for investment purposes are tax deductible.
- Higher loan-to-value ratio than margin loans and no margin calls!
Of course, the key question is what sort of investment to make with your borrowed funds? There are costs associated with borrowing so over the long term the return from the investments must be greater than these costs.
Is this is the right strategy to accelerate your financial position? Talk to a Financial Advisor today about the most ideal financial journey for you.