Location, location, location. Or should we say: education, education, education. New research shows homes in the catchment areas of sought-after public schools can command six-figure price premiums. Here’s why.
Your home can be much more than a roof over your head. It’s also an investment that may build personal wealth and serve as a form of disciplined saving.
And a new analysis by Cotality (formerly CoreLogic) shows our homes can also play an unexpected role, such as helping our kids enjoy a decent education.
Cotality recently looked at property values inside high-performing public high school catchment zones in Sydney and Melbourne.
It found what families around Australia have probably long suspected – that homes located inside catchment areas for popular public schools can command 6-figure premiums compared to similar properties outside the school zone.
The willingness of families to pay more isn’t just about the kids being able to walk to school.
Cotality says that while the price premium within popular public school zones can top $100,000, this can still see families saving money when compared to paying for private schooling over many years.
Better still, unlike school fees, which tend to rise over time, mortgage repayments often decrease in real terms due to inflation.
Pulling up stumps and moving to a new home within a particular school catchment isn’t for everyone.
Fortunately, there are other ways your home and mortgage could help fund a quality education.
Here are three strategies you could consider.
An offset account is an at-call account linked to your home loan.
Instead of earning separate interest on the offset account, the balance is deducted from (or ‘offset’ against) the value of your home loan when loan interest is calculated.
If you have, say, $50,000 in the offset account, and a mortgage of $600,000, loan interest will be based on a balance of $550,000 instead of $600,000.
In this way, an offset account can help you achieve two goals – providing a secure place to grow savings for your child’s education, while also helping you get ahead with your home loan.
Home equity – the difference between the current market value of your home and your loan balance – can be put to work to achieve a variety of personal goals.
With almost half (44.8%) of all suburbs across Australia now at record high values, you could have more home equity than you realise.
One way to use equity is to request a loan top-up from your lender. We can explain what’s involved for your specific circumstances
In general though, the decision to tap into home equity should be a cue to review your home loan.
Refinancing to a new loan could see you save with a lower rate or access improved loan features – all while freeing up equity to pay for a place in the school of your choice.
A rental property may also help pay for your child’s education.
Your tax advisor or accountant can explain if an investment property is a suitable choice for you.
Broadly speaking though, the regular rent you receive, plus possible tax savings from negative gearing, and a rise in the property’s value over time (which can generate more equity to use) all have the potential to help you fund school costs down the track.
Alternatively, you could also consider rentvesting.
This can allow you to buy a more affordable property that’s outside your desired school’s catchment area, while renting a home to live in inside the catchment area.
Paying education expenses can be challenging. But let’s face it, so can a mortgage if you overextend yourself.
That’s why it can be important to assess your borrowing capacity before you go house hunting.
We can help you work out how much you can comfortably borrow, which in turn, can help you buy a home in the catchment area of a school that you’d like to send your kids to.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
Paul da Silva
Director & Senior Mortgage Advisor
