Susan Miller, a part-time receptionist earning about $50,000 a year, achieved an impressive feat by paying off her home loan in just four and a half years. This remarkable accomplishment was born out of a desperate situation she found herself in back in 2017, after buying her ex-husband’s share of their family home. The remaining debt was daunting, equivalent to half the value of the property, and with her low income, Susan was unsure how she would manage to pay off the mortgage.
In a stroke of luck, Susan met an investment adviser at a barbecue, who was a friend of a family member. This encounter inspired her to rethink her approach to debt and finances. Following some unconventional advice, Susan was able to pay off her mortgage in a relatively short period of time. The key to her success lay in taking on more debt strategically, using tax deductions and disciplined savings to eventually make a lump-sum payment to close the loan.
One of the first steps Susan took was to refinance the loan on her Adelaide home and use some of the equity to fund the deposit and stamp duty costs on an investment property in Queensland. By converting both loans to interest-only payments and keeping her ongoing expenses low, Susan was able to maximize her savings potential.
A crucial aspect of Susan’s strategy was opening an offset account on the mortgage for her home and directing all her income payments, including those from her job and investment property, into the account to boost the balance. This helped lower the amount of interest paid each month and allowed her to keep her money in the offset account for as long as possible before spending it, further reducing interest charges.
To supplement her savings, Susan utilized a credit card with an interest-free term to cover her day-to-day expenses, paying off the balance before the interest-free period ended. Additionally, she maximized her tax claims by ensuring her investment property in Queensland was eligible for various deductions and opting for a weekly tax return to continually boost her offset account balance.
With the guidance of her investment adviser, Susan was able to create a financial strategy where each dollar saved reduced her interest expenses, allowing her to save even more while benefiting from tax write-offs. By securing a higher paying job and seeing an increase in rent from her investment property, Susan was able to settle the balance of her home loan in 2021 with a lump-sum payment, while still paying off the loan on the investment property.
Susan’s story serves as a testament to the power of thinking outside the box and seeking advice from financial experts. Her journey highlights the importance of being open to new strategies and approaches when it comes to managing debt and building wealth. By taking calculated risks and making informed decisions, Susan was able to achieve financial freedom and pay off her home loan in a fraction of the time it would have taken through conventional means.