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Good vs bad debt

On May 01 2013
Tagged as:
  • Residential Property

Property debt can be a positive response to market confidence and a sign to invest. According to a ...

Property debt can be a positive response to market confidence and a sign to invest. According to a leading Australian economist, "debt doesn't always have to have negative connotations."

Hans Kunnen’s response comes fresh off the back of first quarter figures released last month revealing fewer Australians are debt-free, despite a drop in new home mortgages in the past three months.


For many Australians, improved household finances may have allowed some fortunate mortgagees to make greater contributions to their mortgages and others to pay off their homes completely.


National figures just released in a comprehensive financial conditions report, showed about 39 per cent of Australians had a mortgage compared with 42.4 per cent for the fourth quarter in 2012.


Good debt can be defined as debt used for property investments and shares which derive income, tax deductions and also hopefully in time increase in value.


Using a mortgage offset account, paying off highest interest debt like credit cards first and not borrowing too much all help lower substantially the risk of bad debt.


Also instead of asking how much a bank will lend you to buy a home or investment property, borrowers should instead ask themselves, “how much can I comfortably borrow?”


Tips to reduce bad debt:


  • Ask for the lowest interest rate possible
  • See if any standard loan fees can  be waived
  • Make extra repayments if you can
  • Budget carefully and regularly
  • Use an offset mortgage account
  • Swap lenders if you can get a better deal elsewhere.


Don’t forget LJ Hooker Home Loans offer highly competitive home loans for both one and two year fixed interest rates.


With rates so low, it is prime time for property owners to think about re-investing.


Property owners should also review their current home loans as well as revisiting their borrowing capacity.


LJ Hooker Home Loans consistently rank among the lowest on offer because of a commitment to being a real alternative to Australia’s big four banks.


LJ Hooker is also the only real estate agency to offer its own brand of home finance.

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