This is perhaps the best time to look at your financial situation and act to pay off your mortgage faster. In Australia, interest rates are at an all-time low. The quicker you pay your home loan, the faster you’ll be debt-free as you enjoy your retirement. Consider the following as a guide on where to start.
Look for lower, competitive interest rate
The home loan market is highly competitive, with thousands of lenders trying to get your attention. This means it’s quite easy to find a lower interest rate. If the banks won’t do, look for alternative lenders.
How to ask for a better rate? Determine which features of your current mortgage you want to keep and compare the interest rates on similar loans at various lenders. Grab it at once when you find a better rate elsewhere. Or, ask your current lender to match the rate or offer you a cheaper option.
One of the benefits associated with an interest-only loan is that lower repayments allow you to pay less monthly and keep more cash liquidity. But, an interest-only loan won’t help you in paying off your mortgage faster.
If you choose to only pay the interest on your loan for a set period of time, and once this period expires, a higher principal amount will have to be paid off, which can be thousands of extra dollars in interest.
Redraw and offset
Offset accounts are the same as everyday savings bank accounts, although they are linked to your home loan or investment loan. Instead of being paid interest separately on your savings by the bank, the value of cash in an offset account is deducted from the balance of your home loan, with interest calculated on the difference.
This can be a good option to make your savings work for you. You’ll save more in home loan interest than you’d earn on a separate savings account, especially now that interest rates are low.
Make additional lump sum repayments
If you are receiving a lump-sum payment, consider using these funds for your loan. Put together your spare cash, end-of-year bonuses, or tax refund. Overtime, these extra funds will be a big help to pay off your mortgage quicker.
Make sure to check with your mortgage provider whether making any extra repayments comes with fees.
Increase the amount of your regular repayment
As major banks calculate interest on a daily basis on a typical 25-year principal and interest mortgage, your payments in the first five years will go mostly towards paying off interest. Any extra you put in during that time will help reduce the amount of interest you pay. A dollar or two a day could help shorten the life of your home loan.
Use the ASAG Reverse Mortgage for Senior Refinancing
For our ASAG customers, refinancing an outstanding home loan without regular repayments is possible. If you’re a senior homeowner looking to refinance, our equity release facility, namely the ASAG Reverse Mortgage, may be suitable for you.
Our reverse mortgage solution allows you to unlock the wealth in your home to access funds without selling or losing your property. The funds can be used for different acceptable objectives, such as Senior Refinancing, as you enjoy a comfortable retirement.
There are no ongoing payments with our reverse mortgage as the loan is paid off when you permanently leave your home, either you downsize, move to residential care, or pass away. However, you may choose to make early repayments without penalty.
Our team at ASAG can assist you with further information on how the loan works by calling us on 1300 002 724 or sending your enquiries at email@example.com.
To get started, feel free to use our tool below to assess your available equity.