Is your home loan on holidays?

September 02, 2014
Melissa Burt

If you are unsure of the home loan interest rate you are currently paying, chances are, your home loan may be enjoying margarita's by the beach this summer!

Taking action now, will enable you to sit back, knowing that your home loan is working as hard as it possibly can for you this summer.

By reviewing your loan and securing a lower interest rate, you can reduce your repayments significantly, while paying your loan back in the same time frame.

If for example, your interest rate is currently 5.5% and your monthly repayments are $2150 with 25 years left to go on your loan term and you refinanced your principle and interest home loan to a rate of 4.84% over a 25 year term, your repayments would reduce to $2019 a month.  That’s $131 back in your pocket each month or $1,572 over a year!!  Significant savings that you could use toward a summer holiday of your own. And this is with the inclusion of the *standard fees involved in refinancing, being added to the new loan.

Better still, you can put the difference between your current repayment and your new repayment, into a transactional offset account, along with your pay and any savings your currently have.  This can make a significant difference to the interest you are charged each month, meaning that your repayments are paying off more principle than interest.

It is all about making your money work smarter and not harder.

How does an offset account work?

An offset account is linked to your home loan which offsets the interest charged to that loan.

Let’s say today you owed $350,000 on your home loan and you had $5000 in your offset account, your lender would calculate the interest on your loan for today based on the amount owing on the loan less any offset balance. In this example, the interest calculated would be based on a net balance of $345,000.  By having a regular balance of $5000 in your offset account, you could effectively cut 4 months off of your loan term and save $11,475 interest, based on a $350,000 principle and interest home loan, over 25 years at 4.84% with a daily balance of $5000 in your offset account vs the same loan and repayments with no offset balance.

By reviewing your home loan today, we can ensure that your home loan is working as hard as it possibly can for you this summer.  It is simple, pain free and the best news is that we will do all the paperwork for you.  Call today on 0403 382 327 and let us find the very best home loan for your needs.

*Based on $350,000 principle and interest home loan over a 25 year term at 5.5% vs 4.84% and standard refinance fees of $804 which includes $304 SA Govt registration fees, $200 settlement fee and estimated $300 discharge fee from the current lender.

Posted in: Refinancing

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