Interest rates have been holding steady at the all-time low of 1.5 per cent since August 2016, but they may not stay that way forever.
While an interest rate change may not be on the cards for some time, many economists are predicting that when a change does happen it will be up.
Because there’s no way to know for sure when interest rates will change, it’s in all mortgage holders best interest to pay their mortgage down as quickly as possible while rates are so low. Every extra dollar paid into a loan can have a huge ripple affect that helps shave years and thousands of dollars from a mortgage.
A few tips to help borrowers get ahead:
Make lump sum payments – Come into some extra money recently? Or perhaps you’re expecting a large tax return? The best thing you can do with it is put it straight onto your mortgage. This will help reduce your principal and see you paying less interest in the long term.
Pay more than the minimum – Pay a little bit more with each payment than you need to. Putting away as little as $100 extra a fortnight could equate to thousands of dollars of savings over time. Plus, if you are already paying extra interest then you will be less affected should there be any rate rises.
Pay more frequently – Do you make monthly repayments? It’s well worth switching to fortnightly or even weekly payments instead. Most lenders set up monthly payments by default but do accept more frequent payments. Since interest is calculated daily, more frequent payments will help save on interest over the life of your loan.
Use an offset account – The amount of money sitting in your offset account reduces the amount of your mortgage that incurs interest. This basically means you will be charged less interest and if you have a decent amount of money in your account you could cut years from your home loan.
Find a better deal – It’s easy to save more if you’re paying less interest. Talk to your home loan provider and see if you can negotiate a lower home loan rate, otherwise shop around to see if there is a better deal being offered by a different lender. Just be mindful of any exit costs if you switch loans.