Home Loan Repayment myths debunked! Here are some simple steps to tackle your fluctuating interest rates Jan 21, 2019 | Uncategorized Buying a home is one of the most important financial decisions that we make. It involves a huge cost, perhaps the largest investment we make in our lifetime, however this ushers in peace and stability in one’s life. Most people who purchase or construct a home go for a Home Loan to finance their project. Repayment of the same is critical as it involves a substantial sum of interest that you need to pay over a period of time. Let us analyse some smart tips, which can help borrowers reduce their liability considerably. Interest on Home Loans The Reserve Bank of Australia is set to hand down its first interest rate call of 2019 in February following 26 months at it’s current record low of 1.5%. It could be a surprise if rate cut was anticipated few months ago, however, most economists are now beginning to flag the likelihood for the same. A borrower must be vigilant to compare rates and push their lender for a better deal, or seek a fixed-rate loan. Alternatively, you could set up an offset account. Use a Split Loan Calculator and if you feel you are getting a raw deal, your may switch to other lenders with more competitive rates. Faster partial-prepayments You don’t have to wait for a windfall to prepay a loan. Small but regular payments can go a long way in chipping away the loan term. While making prepayments, prefer tenure reduction over repayments reduction as the former will lead to greater savings in interest cost, If you keep up with or make extra repayments on your loans, you can get rid of your debt faster. You will save money in interest payments and take a financial load off your shoulders at the earliest. Increase EMI and Reduce tenure If you neither have accumulated savings nor funds you need not feel depressed. After all, you take a loan only when you do not have the required funds upfront. But remember, when interest rates go up, do not extend the tenure, but maintain or, rather, increase the repayment amount. In case rates are reduced, opt for a shorter tenure instead of reducing repayments . This will help you pay off the loan faster. Seek lower rates Your home loan might have had the best interest rate going around at the time you got it, but rates change all the time. Increased interest rates can leave you paying more than you once were, and nobody wants that. Knowing how and why interest rates change can help you negotiate to get a lower rate. Have A Contingency Plan Life is full of uncertainty and while taking a home loan in Australia you must be prepared for anything that can impinge on your ability to pay your repayments on time. This will not only place an additional burden on you and cause undue stress but also have a negative impact on your financial rating. Get a Financial Package Contact Your Finance Adviser’s qualified Mortgage Broker at the earliest who will advise you on variable rate discounts, free offset and transactional banking along with refinancing options if you are not happy with your existing lender and are looking for better interest rate assistance.
