Here are 3 great mortgage tips to help you take control of your home loan and achieve your goals:
1. USE AN OFFSET ACCOUNT
Many variable rate home loans can be organised with an offset account. Using an offset account could help you put any extra cash to work on your home loan – even if you don’t want to use it to pay off the home loan itself. It is simply a savings or transaction account that is linked to your home loan. The more money you have in your offset account, the less interest you must pay on your home loan.
Let’s say you have a $300,000 home loan and keep $20,000 in your offset account, your interest is only calculated on $280,000. This is a great way to put your savings to work for you. If you had kept your savings in a regular savings account, you would have to pay tax on the interest earned. By putting it into an offset account against your home loan, you can save on tax, pay less interest and pay off your home loan sooner.
2. TAKE ADVANTAGE OF TODAY’S LOW INTEREST RATES
Interest rates in Australia are still at all-time lows and there are some very competitive rates and home loan packages being offered across many lenders. If you have had your home loan for more than 2 years, talk to us about the possibility of re-financing to a lower interest rate. Also, if your circumstances have improved since you first took out your home loan, we may be able to get you on a better rate.
3. MAKE BIGGER REPAYMENTS AND LUMPSUM PAYMENTS
By making bigger repayments, you are chipping away more of the principle of your home loan and therefore reducing the amount of interest you pay. Over time, this can help to significantly shorten the term of your loan and save you a lot money.
If you are keen on paying off your loan quicker, it’s a good idea, in your personal or family budget, to actually budget for slightly bigger mortgage repayments. An added advantage of this is that if interest rates were to rise, you will have less interest rate shock compared to someone paying minimum repayments.
We all come across lump sums of cash every now and then. Whether it be a tax refund or a cash gift, if it’s possible, why not put it into your mortgage? Every little bit helps and you could possibly save thousands of dollars in interest over the loan term.
For more information on how you can take control of your mortgage, contact us at Your Future First on 03 9362 1458 or email andy@yourfuturefirst.com.au