QUESTION:
I am a self-employed, 27 year old, earning about $85,000-$90,000. My fiance is 28, in steady employment and earning $75,000.
We are drawing closer to paying off our mortgage, and I wanted to know, given the current market, are we better to focus on paying this off as quickly as possible and start saving/investing from there?
Or are we better to redraw now, and look at entering the share market? We currently have about $120,000 in redraw, and $140,000 remaining on our loan.
We have been putting $5500 a month towards the loan on average.
The only other debt we have is my fiance's HECS debt of about $30,000. Our home is worth about $450,000.
ANSWER:
You should be trying to minimise your non-deductible debt, and maximise your deductible debt while also accumulating as many assets as you can at an early an age as possible.
You are going extremely well for people your age and are in an ideal position to start investing in shares.
Hopefully you have an offset account attached to your home loan, and can accumulate all surplus monies in that account.
I suggest you take advice about a separate home equity loan for, say $100,000, which could be invested in a quality diversified Australian share trust.
The interest should be no more than $6000 a year, tax-deductible, which should be well within your capacity. Make sure you reinvest all the dividends to maximise the compounding effect.
