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General Finance Assistance

General Financial Assistance

Including early mortgage repayment strategies, we provide a comprehensive range of services and finance assistance for our valued clients.

Consequently, below and on the pages following, are details of the additional general finance assistance services available. They are:

Early Mortgage Repayment Strategies

Early mortgage repayment - Picture of hand putting money into roof money-boxEarly mortgage repayment strategies are being employed by an ever-growing number of homeowners. If you are a homeowner, or about to be, the reason for this trend is fairly obvious. That is, like you, most people prefer to not be saddled with a mortgage debt any longer than they need to.

So, let’s have a look at some simple strategies that could help you own your home sooner than expected.

These five strategies could help you get ahead on your mortgage, which could save you a significant amount of money on interest charges in the process:

>> Check that you’re paying a competitive rate of interest

>> Pay a little extra off your home loan each month

>> Make lump sum payments into your home loan

>> Make your loan repayments fortnightly, or even weekly

>> Consider a home loan offset account

Check that you’re paying a competitive rate of interest

One means of doing this is to check Canstar’s database. In so doing, you will be able to see the gap between the highest and lowest home loan comparison rates. Consequently, if you see that your loan is at the expensive end of the spectrum, you may wish to consider other lender options.

The mortgage market is fiercely competitive, with lenders being very keen on obtaining new business. Therefore, if you are seen to be a good candidate, you may well be eligible for a more competitively priced home loan interest rate. To be classed as a “good candidate”, you will need to have a good credit rating and the identifiable means to meet repayments.

The reality is that many lenders offer their best deals for new customers. So, don’t be afraid to check out what’s available elsewhere, or try to negotiate a better home loan rate with your current lender.

Pay a little extra off your home loan each month

Regularly paying a bit more off your loan is a simple way you may be able to pay off your home loan faster. And you don’t have to pay a lot extra to potentially reap valuable rewards. For instance, if you pay just a dollar a day more than required into your loan, it could help you pay it off months earlier.

However, we do advise that you check with your mortgage provider to determine whether you will need to pay any fees for making extra repayments. The same applies for the early termination of your mortgage. Having done this, you can then factor these into your own calculations.

To assist you with this, check out Canstar’s mortgage calculator. Doing so will show you how making extra repayments could help you pay off your loan sooner.

Make lump sum payments into your home loan

Do you receive an unbudgeted-for lump sum of cash each year, such as a tax refund or work bonus? If so, these handy sources of cash could help you pay off your home loan sooner.

Using a windfall to make a lump sum payment on your home loan (or in an offset account – more on that later) could dramatically accelerate your loan reduction. This is because the money comes straight off your loan balance.

Also, you could consider making it an annual habit to pay lump sums into your loan to speed up your interest savings. However, again it would pay to check with your lender on whether any fees or restrictions apply.

Make your loan repayments fortnightly, or even weekly

An increasingly popular early mortgage repayment strategy is to make payments more frequently, that is, fortnightly or even weekly.

Rather than making repayments monthly, you could aim to pay half your regular repayment each fortnight. Therefore, over the course of a year, you’ll make 26 repayments. Subsequently, that’s equal to 13 regular monthly payments, instead of the 12 monthly repayments your lender will typically ask for. So, you’ll make one month’s extra repayment each year without too much impact on your hip pocket.

Even more effective is the strategy of making weekly payments. Making weekly payments (say, by direct debit) at the rate of a quarter of your monthly amount will have an even more dramatic effect on your mortgage balance.

However, do note – the success of this strategy can depend on how your lender treats monthly versus fortnightly or weekly repayments.

Consider a home loan offset account

A home loan offset account is basically a savings or transaction account attached to your home loan. Instead of being paid separate interest on your savings, the value of any cash in an offset account is instead deducted from your home loan balance. Accordingly, your interest is calculated on the difference.

For example, let’s say that you have a home loan of $400,000 and savings of $20,000 in a 100% offset account. The result is that the interest you pay will be based on a loan of $380,000. This can subsequently reduce your monthly interest costs. Thus, if your regular repayments stay the same, more of each payment goes towards paying down the loan principal. Ergo, this should in turn help you pay off your home loan sooner.

As an early mortgage repayment strategy, offset accounts can be a savvy way to make your savings work for you. Reason being is that you’ll normally save more in home loan interest than you’d likely earn on a separate savings account. However, because your spare cash in an offset account is usually still accessible, it can take some discipline to avoid dipping into the linked account.

Similarly, you can achieve a similar result if your home loan provider offers a redraw facility. Even so, it would pay to check for any fees or time delays that may apply to accessing the money. Also, some home loan packages that include offset accounts or redraw facilities may charge higher fees and rates than packages that do not include these features. Therefore, it is a good idea to take this into consideration when comparing.

Additionally, it’s worth noting that redraw facilities don’t have the same flexibility as offset accounts. Your Wealth-IQ adviser can help you understand the differences between them.

Final Word

There is an additional method of early mortgage repayment – debt recycling. Debt recycling is considered a high-risk strategy. However, if you want to find out more, please go here.

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