Simple; they get your hard earned money working for them, better than you get it working for yourself!
You work hard for your money, so doesn’t it make sense for your money to work hard for you?
Let’s start by assuming you have a house with finance secured on it. We call that a mortgage and simply the difference between the mortgage amount and what the house is worth is called equity or sometimes collateral.
Over time, your house value increases and so does the amount of equity.
You can broadly use this equity in one of two ways:
1. With the additional security offered by more equity, you can move your mortgage from the current lender to another one and reduce your interest / loan payments. Sometimes, you don’t even have to change lenders to get a better deal.
What would you do with an extra $50, $100 or $200 each month saved by changing to a more competitive interest rate? Use the saving to top up your pension, invest in your child’s education fund, perhaps some home improvements or accelerate the speed at which your mortgage loan is repaid?
Your home has not increased in value? Don’t worry, just Ask Andrew as there are many options available to you and he will help you decide the right one for you.
2. Alternatively, you could use the lower interest rates available to borrow a little more and use these funds to act as a deposit on a second, third or even fourth house. Equity release could provide you with the money to do this tax efficiently.
Now this is where building your wealth gets really interesting for you start to create a passive (rental) income. It’s where your money starts to work harder for you!
Are you now ready to get your money working harder for you?
As the loan is secured, you run the risk of losing your home by a process called repossession. Losing your ability to generate an income if often the cause of non-payment which is why we always recommend properly protecting yourself in the event of death or long-term illness.
Owning a second, third, fourth or more properties is a good way to build up your financial wealth and some lenders permit multiple mortgages to facilitate this. These are known as BTL mortgages as you intend to let (or rent) the property to a tenant. Fundamentally they are the same as your normal residential mortgage, but perhaps with an additional clause or two specifically relating to the letting of the property.
I help international workers and expatriates plan their finances. Providing unbiased and independent financial advice, I work with many of the world's major Banks and Financial Institutions covering many areas. I offer a free consultancy meeting lasting 1.5 hours in which we can review your current financial circumstances and suggest options to you that are designed for your money to work harder for you, and in a tax efficient way.