March 25, 2015
For many Australians, the Easter long weekend provides the opportunity to have some much needed down time.
But with interest rates sitting so low and speculation mounting that the cash rate could fall again in the coming months, the Easter long weekend also opens up the perfect opportunity for borrowers to spend some time thinking about whether their home loan is working as best as it can for them and their needs.
“With interest rates at historical lows, 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,” Mortgage Choice spokesperson Jessica Darnbrough said.
“We are hearing from our mortgage brokers around the country that a large number of current 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,” she said.
“Many economists are now predicting that interest rates won't rise until at least 2016, though this time frame is certainly not set in stone. So, with the future of rates very much uncertain, now is a great time for borrowers to start paying off their mortgage faster while they have the ability to do so.”
For those wishing to pay off their mortgage sooner rather than later, there are a few easy techniques borrowers can implement, including:
Refinance your mortgage: With interest rates sitting at historical 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 life of your 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: Those borrowers who make the most of their offset account and use it as effectively as possible, 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.
If you don't have an offset account or are looking for other ways to pay off your mortgage faster, Ms Darnbrough said it is worth booking an appointment with your local mortgage broker or financial planner.
“Over this Easter long weekend, it might be worth speaking to your local mortgage broker or financial planner to see whether or not there are other things you can do to help you pay off your mortgage faster. Your mortgage broker and/or financial planner will be able to highlight the ways in which you can make your money work harder for you and ultimately achieve your financial goals sooner,” she said.
If you would like learn more about your home loan or financial advice options, call 13 77 62.