Interest rates have begun to rise, but that doesn’t mean you have no control over the size of your repayments.
There are plenty of ways to keep your repayments down – both now and for the future. The trick is to keep tabs on where your money goes and ensure you’re getting the best possible deal for you and your family.
Here are 10 things to consider.
1. Don’t panic
Even with the rises in May and June, interest rates are still at historically low levels, so your repayments won’t increase by mu
By panicking and making rash decisions, you could inadvertently lock yourself into something that costs you more, not less.
Keep a level head and do your homework before making any changes.
2. Pay more now
With rates historically low, there’s still an opportunity to pay a bit more now and get ahead on your loan.
Not only will you be more accustomed to paying more as rates rise, but also chipped away more of the principal, reducing your future repayments.
If your loan doesn’t allow extra repayments, then the next point could be for you.
3. Review your loans
Chances are you haven’t reviewed your loans for some time, if ever. Now is a great time to do exactly that.
We can help you see what you could be paying elsewhere. How do those numbers look against your current rate?
Even if you’re getting a good deal, it pays to ask your current lender to do better – most will discount your rate to keep you as a customer. But you don’t get if you don’t ask!
4. Get an offset account
An offset account is one of the most important element in your loan structure.
Your income gets paid into the offset account and sits against your mortgage, reducing the total amount you owe – and in turn, how much interest you pay.
5. Interest-only is a last resort
Don’t be tempted to switch your owner occupy home loan to interest-only to save a few dollars unless you’re absolutely desperate.
Sure, interest-only reduces your repayments in the short-term. But because you’re not paying anything off the principal amount, it doesn’t get any smaller. The result? You pay far more interest over the life of the loan.
This should only be an option of last resort to avoid losing your home.
6. Consider consolidating
Home loans typically have much lower interest rates than other debts – many mortgages nowadays are in the 2% range; credit cards can be 10 times that figure.
You may be able to reduce your total repayments by consolidating more expensive debts into your mortgage.
Plus, it’s easier to keep track of one large debt than multiple smaller ones.
7. Avoid new debts
Keeping a lid on repayments also involves not accruing new debts wherever possible.
Credit cards and buy now, pay later schemes are easy to sign up to. However, if you don’t make repayments on time, the interest you’re charged will hurt.
If you’re not good at making repayments on time, consider using debit cards or cash – they won’t accrue interest and stop you spending what you don’t have.
8. Get saving
While banks hoover up more in interest repayments, you can return the favour and place all of your savings into an offset account- then use those savings to reduce your daily interest rate on your home loan.
9. Use your tax refund
Most of us receive a tax refund each year for tax we’ve overpaid and relevant deductions we’ve claim.
With tax time coming round again, if you can resist the urge to splurge, you’ll reduce your repayments by using that cash to pay off more of your loan.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.