According to a recent report by LF Economics, Australia is now on par with Switzerland when it comes to household debt. It does not help that property prices continue to rise, hence also increasing people’s liabilities. However, some savvy homeowners are defying the trend of rising debt by employing some helpful strategies, such as the following:
Getting a mortgage offset account. An offset account allows you to offset interest by putting your savings into an attached transition account. This can significantly reduce the amount you pay over the life of your loan, as well as the time period that you are paying your loan.
Set up additional repayments. This is applicable for those with variable home loans, as you can set up extra repayments when you have additional money to spare. You might want to look at a split loan option, where a proportion of your home is tied to a fixed rate and another proportion is variable.
Put your extra money into your home loan. Bonuses, dividends, and tax refunds going straight into your home loan can take a large chunk out of it. And now that the interest rates are at a record low, more of your money goes towards paying off the capital.
Look for a better rate. If you are paying more than four per cent interest on your mortgage, then it is time to shop for more competitive deals. However, take note of hefty exit fees that might negate the benefits you receive from refinancing.
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan