Home Loan Innovation

Read this article to find out how.

A very popular wealth creation strategy is after a few years of owning a property and paying down some of the home loan is to access the equity. There are two components to this equity, these are:

• The amount of the loan that has been paid off
• The increase in the property value, if the property market has increased.

This strategy works if property prices have increased and you have been able to pay more off your home loan than is required. Many of us adopt this strategy using negative gearing; however it is important to understand that negative gearing works best in a low tax free threshold with high marginal tax rates. The Australian taxation environment is now a high tax free threshold and low marginal tax regime, meaning that negative gearing is less attractive.

There is a better solution, its called Aspire.

Aspire is a structured mortgage product where there is an investment embedded in the loan repayment with repayment protection.  It is more than just a standard home loan as it allows the customer to build wealth in an investment portfolio as well as equity in their property at the same time. Importantly, it all starts from the 1st repayment.

So rather than having to wait for property prices to increase or for the loan to have been paid down, Aspire means that you start the wealth creation process years earlier than was previously the case. Of course if property prices do rise then you can access the equity as well.

Another major advantage of Aspire is that it replicates the home buyer’s life cycle; in the early years the focus is primarily on debt reduction, while in the later years and consistent with life time investments, the product allows customers to be debt free and have an investment portfolio, i.e. Aspire moves from being a home loan to an investment.

Aspire is unique as it combines all the features of a standard home loan with an effective long term financial strategy allowing customers to either pay off their home loan early or to own their home plus an investment portfolio at maturity date. For owner occupier property buyers wishing to create wealth and are unsure how to start, Aspire is a sensible and easy solution that makes sense.

Aspire works for investment property buyers as they are mutually paying down their investment property loan and getting asset diversification so that when an investor comes to retire they own their property and an investment portfolio, both of which are income producing assets.