Mortgage free at a young age vs keeping debt for longer

Hey guys,

Been having the idea of being mortgage free crossing my mind for a fair while now.
I'm in my mid thirties, higher than average wage and have a PPOR(600K$/owing 430K) and an IP(1.3m$/owing 450K) and also i have a good sum of savings in an offset account.

Plan is to move to the IP and sell the current PPOR which would mean i can be mortgage free hence freeing up all my salary to invest in other asset classes or maybe a business.Also, starting a family with no mortgage sounds pretty appealing too since i would be able to provide a better life for my family with the more available cashflow and i can work less if needs be in order to spend more time with the family...

I know it sounds a bit shortsighted but being at a younger age will still give me the opportunity to invest and prepare for retirement.

Of course, the other scenario would be to keep minimising the Non deductible debt first and then move on to the deductible debt and keep investing...

Any thoughts would be much appreciated!

 

Many ways to do things and tis is good, but if you invest wthout leverage you don't get the same compounding effect

 

Depends on what you want in life.

Knowing that your home will never be taken from you is a massive step forward.

Allowing one person to fully own the family home can potentially allow the other to take extreme risks.

Just a thought.

 

I love the idea of being mortgage free on the PPOR - or more to the point, no non-deductible debt. Not having to pay for your home is the first freedom check-box in my books, and gives so much extra cashflow to do fun stuff.

Once that's done, you can start designing the life you want in retirement and invest to that purpose with your increased cashflow. Beautiful!

(I just re-read that and should clarify I don't have a book, or actual check boxes. Only in my head )

 

Really interesting post. These days the thought of selling up to be debt free did cross my mind too, but I think the question of "What next?" comes to mind. The idea is def appealing but due to relatively young age and the opportunity to grow the wealth in other ways, I still viewed properties as a good option. The other day, my managing agent informed me that there they had an investor that was willing to pay almost double for a property I purchased a couple of years ago and I just said no because I believe in the properties I have and for me I am not in the business of selling.

 

You're at <50% LVR which is a good position to be in. I believe it's good to have some debt to leverage off otherwise it's a lazy balance sheet.

Keep your cash in the offset against the PPOR. In the future, if you upgrade your PPOR, then you'll still have a loan against your old PPOR which will turn into a IP, and you will be able to deduct the interest costs.

 

Mortgage free at a young age is good. You can always use funds if you decide to invest further when you see opportunity.

Don't always listen to the crusted on baby-boomer investor type on PC. Some are so fixated on just getting more and more that they don't know when to stop, and chill. Some would be 60+, with millions in investments, and still working.

Some of us just want enough for a comfortable retirements, and prefer to be mortgage and debt free at a young age.

Like others have said, the offset money sound be in offsets against your current PPOR, and then moved across to the IP that becomes your new PPOR.

 

Mortgage free, without kids, in your mid 30s = an awesome situation to be in.

Doesn't sound like the property is a shack either!

Well done for even having this option available to you!

Personally - I think your PPOR debt free idea sounds great.

Cheers

Jamie

 

I would be thrilled to be mortgage-free TBH. I'm not sure I would even bother investing further besides general savings or something similarly low effort at that stage. Time is more valuable than money for me once that is achieved.

I'm 31 and hoping to pay off our PPOR in the next 10 years or so. Just having that freed-up income (or the rental income if we rent it out) opens up so many possibilities like extended travel, more time to pursue hobbies in depth, trying out different types of work on the side, maybe doing some study, etc.

 

This. Well you are riding one and leading one atm. Just switch horses when and if it suits you. But do it smart as per above.
I think you are way too young to put your cue back in the rack, but ultimately you must own your own decisions.

 

Thanks everyone for the great replies. Both properties still have potential to grow especially the current PPOR hence why i thought it would be great to realise some profit once i sell and be PPOR debt free vs the longterm route.

Definitely keeping the offset facility and then moving it across when i move to the IP and completely agreed about leveraging to invest. I'm very grateful for all the professionals/contributors around PC that pour in so much great insight/knowledge since everything that i learnt about property investing is from this forum!

I have no intentions of slowing down on work either as i love what i do but as many mentioned above, i'll get the freedom of picking the jobs i like,more time with family,hobbies, and also investing when i feel the time is right for it without worrying about the PPOR debt.

Current PPOR is in Melbourne's north/west(developer's have been here in force lately!!) so the latest FHO grant might accelerate my timeframe to sell.

 

Mate I hear ya. Have had the same thoughts cross my mind recently. Also young (30) and could sell a block of land we hold to make PPOR (500k) mortgage free and a good savings acc while retaining 2 other IP's. Extremely tempting some days, however...

Hold on for a few more years, build new PPOR on land, have it paid off by 2023. 1mil PPOR mortgage free and 3 IP's with one of us being able to retire. This is much more tempting and keeps us going.

Just do what you feel is right for you. As you say plenty of time to invest for your future.

 

As a much maligned baby boomer, I think owning your PPOR mortgage free is a priority.

However, in your case things are a little more complex.

A lot depends on your current PPOR and it's prospects for capital gain. If it is in a good area, good condition, easy to rent and likely to be a good long term hold then it may be sensible to keep it. You have already paid the ingoing costs, and will always have the cgt free component for the time it was your PPOR.

As you intend to continue investing, have a close look at this property and its prospects before deciding to sell.

Live in whichever property you prefer.

And if course, keep all cash in an offset attached to whichever is your PPOR.
Marg