If you’re one of the many people who pay a mortgage every month, it can be easy to forget your due bills. Although the payment date doesn’t change, other variables in your life can force you to miss it or fall short in your finances.
However, if you take the time to adjust your loan regularly, you’ll be able to manage your debt better and save money in the process.
In this article, we’ll share several options you can take to customise your loan.
If you have a variable-rate home loan, refinancing could save you money. If you have a variable-rate loan and interest rates are low, you may be able to switch to a lower fixed-rate loan. With the low-interest rates, the Reserve Bank of Australia's cash rate is currently increasing.
Your home loan interest rate will not change for the duration of the fixed-rate term, generally one to five years. When you know your repayments won't fluctuate, you can better plan your finances. It won't impact you if interest rates increase in the future since your rate is locked in. You may tailor your home loan with fixed rates if you search for stability and predictability.
Locking in a fixed-rate loan gives you a solid idea of how much you will pay each month. This can be helpful when planning other financial goals.
An Offset Sub-Account
As a lender, we're keen to offer low-interest rates to borrowers who can demonstrate a healthy financial situation. One way we do this is with an offset account.
In short, an offset account is used to reduce the interest you pay on your home loan. For example, if you've got a $500,000 home loan and $50,000 in the offset account, you may reduce your interest rate by an additional ten basis points. It's important to note that most of our home loans come with offset accounts for an extra ten basis points on very competitive interest rates.
The offset account works if you have a regular income. If your income is irregular, it can be tricky to ensure the interest is paid in full. We can still offer a market-leading interest rate with the offset account, but you may not benefit from the additional ten basis points.
A Split Loan
A split mortgage can be an excellent plan if you want the best of both variable and fixed-rate mortgages. With a divided mortgage, you may have, say, 50 per cent of the mortgage balance at a fixed rate and the other 50 per cent at a variable rate. Depending on your lender's approval, you can split the debt 50/50, 60/40, or 90/10.
For instance, with a $500,000 loan you plan to repay in 30 years, you might opt to put 60 percent of it on a variable interest rate and 40 per cent on a fixed rate. As a result, the $300,000 balance would be borrowed at 3 percent interest with monthly payments of 8 per cent. The remaining $200,000 would repay 2.5 per cent interest with monthly payments of 7.5 per cent.
Split mortgages offer a variety of benefits. For example, if interest rates fall during the term of your mortgage, you can switch from paying 3 per cent on $300,000 to spending 2.5 per cent on $200,000. You can also divide your mortgage so that you have fixed monthly payments for part of it and a variable monthly payment for part of it; this can give you more stable cash flow while keeping the costs low.
Many Australians have the dream of owning their own home. However, a house can be costly, especially in large cities. However, you can make that dream a reality with the right mortgage strategy.
Wealthy You is one of Sydney's few alternative financing providers. We provide the best home loans in Sydney, assisting clients in obtaining the financial assistance they require. First-time home buyers may now get the money they need to buy their first house. Set up an appointment with Sydney's best mortgage brokers today by visiting our website.