Welcome to the third video in our series about the 6 Building Blocks to Financial Success. In this video, we’re going to talk about maximising your savings and reducing bad debts. In the previous video, we talked about the income and expenses part of the argument, having a surplus income. This video is about the assets and liabilities part of that equation. So we’re going to use the previous example that we used, and let’s just say had a property a few years ago that you purchased for $600k and the loan on it was $480k, and again those repayments are $2.5k a month, or you may have decided that you’ve gone with our new strategy, in which case your repayments are $1,950 a month. And we’ve now got $550 a month to invest.
Okay let’s decide that we’re going to now get that property re-valued, so let’s just say property prices have gone up over the last few years, that property is now worth 800k. Again you still got the $490k loan, but we’re able to refinance that property at 80% quite easily, hopefully, with your lender. In which case we’ll take out the $480k loan over here and we may be able to get an additional loan of around about $160k. So we’re saying the new repayments over here are $1,950 a month. Now, $160k loan, if we say we’re going to do interest only because we’re going to use it for investment, we’re going to look to build our wealth and free up cash flow. Those repayments are about $550 a month.
Under this example, you’ve got the same repayments as you had on your original loan but you’ve got more debt now. So, we’ve got that existing loan over here which is partly interest only, partly principal and interest. We’ve done that…restructured that to free up our cash flow. We’ve now be able to get an additional loan of $160k, our total commitments a month haven’t changed from where we are originally, but now we can take that $160k and invest.
In our next video we’ll talk about where we’re going to invest that money and we want to make sure we are doing it wisely and tax effectively.
Again, hopefully, you’re enjoying this video content. If you do, please like us on Facebook, please also tag and comment with your friends, and we look forward to see you in the next video. Thanks very much. Bye.