The same dollar, three homes
Compounding rewards two things: time, and how much of your lever you put to work. This tool takes the same money and follows it down three paths over the years you hold it. A savings account, where the interest is taxed every year. Your own home, where the whole property grows and the gain is free of capital gains tax when you sell. Or an investment property, where growth is untaxed while you hold, with capital gains tax due only at sale. Same money in, same growth rate, so you can see what time, tax, and borrowing do to what you actually keep.
Set your numbers
Move the sliders. Every path uses the same money in and the same growth rate, so the comparison stays fair.
To demonstrate the power of compounding, this tool leaves out any associated home loan repayments, or any rent where there is no home ownership. Our aim is to equate the cash invested, be it into a bank or property, or any other asset class such as ETFs, and then highlight the impact of leverage. Stripping home payments from the exercise reduces the complexity given the many variables. To model your own position accurately, contact Charter Finance.
Set your selling age at least one year later than your buying age to see the projection.
What you keep, three ways
All figures are shown at the age you sell or stop.
Savings
Money in the bank
Your money in, growing at the rate you set, with interest taxed every year.
$0
Your balance after tax
Your money in$0
Growth kept after tax$0
Growth lost to tax$0
Return on your money in0%
Interest is taxed each year at your marginal rate, so the balance grows more slowly than the headline rate suggests. Taxed every year
Your home
Owner-occupied home
Your money in unlocks the whole property. The full value grows. No tax on the gain when you sell.
$0
Your equity, free of capital gains tax
Your money in$0
Property value at sale$0
Loan against the property$0
Extra you added$
Return on your money in0%
Your own home is free of capital gains tax on sale. The loan against the property is not modelled with repayments. Any extra you add goes straight to your equity. Living costs are not modelled. No tax on the gain
Investment
Investment property
Same borrowing, same growth. No tax as you hold. Capital gains tax at sale, worked out the indexation way.
$0
Your equity after capital gains tax
Your money in$0
Property value at sale$0
Loan against the property$0
Extra you added$
Capital gains tax at sale$0
Return on your money in0%
Capital gains tax here uses the indexation method: 3% inflation lifts the purchase cost before the gain is taxed. Indicative only. Indexation method
Your money over the years you hold
Three paths, same money in, same growth rate.
Why the property paths pull ahead
The money you have to invest unlocks the whole property, so the growth runs on the full price, not just your deposit. You put in $375,000, but you control a $1,500,000 asset. That borrowing is the bigger driver of the gap between the paths. Tax is the second driver. This tool shows both. It assumes you would pay to live somewhere either way, so it does not model rent against mortgage repayments.
Time is the quiet ingredient
Someone who buys at 30 and holds to 60 gives compounding 30 years to work. Buy the same property later and the same growth rate has fewer years to build on. Move the buying-age slider to see how much those extra years are worth. The point is not the asset. It is the time, or the years, and leverage.
Understand your LEVER
Your LEVER is the spare cashflow you can put to work each year, whether that is paying down debt or building an asset. This tool shows what disciplined saving can become. What it cannot and does not do is tell you what is right for your situation, your income or your borrowing capacity.
Talk to Charter Finance about your LEVER