With the Reserve Bank of Australia (RBA) passing down four interest rate hikes in as many months, and more expected to follow, now’s a great time to take stock of your current home loan situation and make a plan for managing your debt. Here’s our top tips:
1. Make fortnightly repayments instead of monthly
Making the switch means two extra payments a year; and on a 30-year loan of $800,000 at an interest rate of 5%, that’s a saving of $210,000! What’s more, you could pay off your loan five years earlier. Win-win.
2. Find ways to pay more
One of the easiest ways to get ahead is to make additional repayments when you can. Think tax return or work bonuses. Not all loans accept additional repayments so check with your lender first. Another way of paying more is to continue paying the loan based on a higher interest rate even if you are offered a lower rate when setting up a new loan or new terms.
3. Use an offset account
Some banks offer offset on both fixed and variable home loans. An offset account is an easy way to reduce the interest you pay and can help you pay off your loan faster. By using your offset account for regular transactions, you can build up cash reserves without even trying and every dollar becomes a dollar less you pay in interest.
4. Check your spending
A tried and true method for making every dollar count is to tighten your belt. Check you’re getting the best deals from your insurance provider, look into concessions on utilities, rethink that new vehicle or second coffee, and look at ways you can redirect possible spending towards your mortgage (or leave it in your offset account).
5. Consider a fixed rate
By locking in a fixed rate on all or part (split loan) of your mortgage you can be confident knowing what your repayments will be for the number of years you lock in for.
If you’re worried about the future of your home loan, talk to us sooner rather than later.
Whether it’s reducing your repayments, offering you a lower interest rate or temporarily pausing your home loan, there are options. A mortgage is a marathon, not a sprint, and we are here to help throughout your entire journey.