Property Investors, could prepaying your interest help you?

As 30 June fast approaches, property investors should have started to consider their investment and tax strategies for the current financial year. One strategy still available is to consider prepaying a full years interest in advance. 

Interest in advance is where you fix the interest rate on an investment loan at an agreed rate for 12 months and pay the interest that is normally incurred throughout the year in one upfront interest payment before the 30th June deadline for the financial year. 

The sometimes discounted interest rate is not the only advantage of this strategy. Prepaying interest can also provide other benefits such as: 

  • assisting budgeting and cash flow, by making one upfront payment rather than regular interest payment throughout the year. 
  • locking in a  fixed annual rate to protect against possible interest rate rises over the next 12 months. 
  • an immediate tax deduction in the year of payment, especially if your taxable income is higher now than it is expected to be in future years. This strategy could be even more effective if there is a planned break from the workforce or a change in employment.

Obviously, this blog doesn’t take into account your specific personal situation into account and I encourage all of you with investment debt to discuss this strategy with your chosen finance professional or reach out to me or one of the IM Team on 08 6222 7909 or support@inspired money.com.au if you are not currently working with a finance professional.

This article was written by Darrel Roberts, Head of Mortgage Lending Services at Inspired Money with over 30 years of experience in mortgage lending and accounting he is an expert in his field.

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