Buying property is more than buying a home. It’s also making an investment in your future wealth. Besides providing shelter for you and your family, a home is a financial asset. Unlike rent, making monthly mortgage payments is building equity, not throwing money down the drain.
Benefits of Homeownership
Many people think of property investment as buying a property to rent out, but actually the home you buy for your own residence is an investment as well that provides many financial benefits.
Land tax is levied annually on businesses, organisations and investors who rent out property. However, for homeowners who make their property their main residence, land tax is waived.
Stamp Duty is charged on most property transactions and is a significant cost for businesses and investors who rent out a dwelling. For first time home buyers who live in their home though, Stamp duty is waived on vacant land up to $300,000 in value. This adds up to thousands of dollars in savings that can be used to build up equity instead.
Capital Gains Exemption
When selling an asset that has grown in value, Capital gains tax is charged. By Australian law, however, Capital Gains tax is exempted for the primary place of residence. Selling your home that has grown in value won’t induce capital gains tax, but selling shares will.
The WA government has recently upped the First Home Owner’s grant to $10,000, putting more money in the pocket for first time buyers of new homes. This grant isn’t available to investors who rent out their property, but only applies to buyers who use the property for their main residence.
Interest rates are at their lowest decades, making it cheaper than ever to take out a loan. With low interest rates, the cost of borrowing is also lowered, improving the return on investment for Australians who buy property.
Tips for Investing
All these benefits work to make property a solid investment, especially for those buying their first home in Western Australia. However, there are a few things you can do to make your investment even better.
While home ownership starts when the contract is signed, financial ownership, or equity, is based on how much of the loan’s principal is paid off. The cheapest and fastest way to build up equity is to pay more on the deposit up front.
If deposit of 20% or more is paid, Lenders Mortgage Insurance (LMI) is waived, saving you thousands. In addition, the greater the deposit, the less that is borrowed, and the quicker the principal gets paid off. You own your property sooner.
Make Extra Repayments
Making your monthly payments on time keeps you current on your mortgage. However, at the start of a loan most of the payments are going towards principal. Making extra repayments, especially when interest rates are low speeds up this process dramatically and can cut years off your mortgage.
Owning a home is the Great Australian Dream and besides providing shelter for your family, it’s also a solid financial investment. For more information about investing in your future, contact a friendly Perth FHOC representative today.