Recent times have been very uncertain and thrown us off guard with our financial forecasting. However, we can prepare better this year with right perspective and better financial planning. Below are a few tips that will help pay your home loan sooner:
1. Refinancing with new low interest rates:
Post-pandemic interest rates are at its lowest and therefore refinancing your home loan could potentially save you thousands of dollars.
Get in touch with us to compare your existing home loan rates with the most competitive home loan rates available in the market.
You may also consider fixing your interest rates to make your budgeting easier in challenging times.
Alternatively, you may switch to the most competitive variable home loan rate with an offset facility to continue saving extra dollars. Please note that RBA has indicated that they don't have any plans to increase the cash rate for another three years to assist with post-pandemic recovery.
2. Cut down home loan repayment duration:
If your financial situation permits, you may consider reducing your home loan duration. This will make your repayments more frequent and faster.
Reducing your repayment duration will not only save you a lot of interest costs but also clear you off the mortgage sooner.
If your home loan repayment frequency is monthly, consider switching it either fortnightly or weekly.
3. Use equity to your advantage:
Those of you who are new to financial world, equity is the difference between the current value of your home and the amount currently outstanding on your home loan.
If you wish to hold on to your extra cash that you saved, you may use the equity as a collateral to borrow for repair or renovations without going through the entire loan approval process.
4. Use an offset account or redraw facility:
Check whether your existing home loan has an offset or redraw facility. Offset and redraw facility both can be used for saving your financial costs.
Offset account is an everyday bank account that's linked to your home loan. You can deposit your salary and additional savings into the offset account and its balance then offsets against the amount owing on your home loan.
A redraw facility allows you to withdraw money from the 'pool' of extra repayments that you've already made above and beyond the minimum monthly requirements.
Therefore, consider putting all your additional savings such as bonus, tax refund or inheritance in the offset account linked to your home loan.
5. Maintain a good credit score:
Recent times have been difficult with regards to financial stability. However, prioritise paying your monthly instalments over other avoidable expenses.
In order to secure better interest rates for future mortgages, make your home loan repayment in timely manner.
Set timely reminders or automatic payments to ensure that you do not miss out on any payments.
6. Debt consolidation:
Lastly, consolidate all your unsecure debts (such as credit cards, personal loan, car loan, etc) under your home loan not only to reduce your cost of financing but also to ensure that you make timely repayments.