WITH interest rates sitting so low and speculation mounting that the cash rate could fall again in the coming months, there is a great opportunity now for borrowers to think about whether their home loan is working as best as it can for them and their needs.
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In fact, in this low interest rate environment, any extra money a borrower can contribute to their monthly mortgage repayments makes an even bigger difference than if the same amount of money was paid off on a mortgage with a higher interest rate.
As a mortgage broker I see that a large number of borrowers are not thinking about how to best use the current rate environment to their advantage. Making deeper inroads now will make a big difference in interest and time spent repaying the loan.
For those wishing to pay off their mortgage sooner there are a few easy techniques borrowers can implement, including:
■ Refinance your mortgage:
With interest rates sitting at historic lows and Australia’s lenders competing aggressively for business through sharp home loan pricing, you may find there is another product on the market that is not only better suited to your needs, but one that boasts a much lower interest rate, saving you thousands of dollars in interest over the loan.
■ Continue to make higher repayments:
Since the beginning of the year, most lenders have shaved at least 25 basis points from their suite of home loan products. As such, many borrowers would find that their mortgage repayments have dropped. But, instead of lowering your monthly mortgage repayments, it is a good idea for borrowers to continue paying off their mortgage as though rates have not dropped. By continuing to make higher mortgage repayments, borrowers will find they are able to pay off their mortgage faster.
■ Make the most of an offset account:
Borrowers who make the most of their offset account are able to significantly reduce the amount of interest they have to pay on their home loan.
So, if you have recently received a pay rise or are expecting to receive a good amount of tax back at the end of the financial year, make sure you feed it all into your offset account as this will help you to offset the amount of interest payable on your home loan.
Richard Windeyer is a mortgage broker with Mortgage Choice. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Phone: Richard Windeyer on 1800 01 LOAN.