Question:
We currently have a $80,000 balance on the mortgage of our principal place of residence. We have $80,000 in a 5 per cent savings account with one of the big four banks and wonder how we could get more for it.
Should we use the $80,000 savings to pay off our mortgage or we should invest the money in shares?
Answer:
Since the mortgage is a non-deductible one because it was for your residence, you should be much better off to pay off your mortgage by using the $80,000 that is currently in your savings account. This will earn you an effective 7 per cent after tax.
You could then borrow back $80,000 or even more to invest in shares and the interest on this new loan will be tax deductible.