With record low-interest rates predicted to be around for at least another 18-months, many financial experts suggest that staying on top of your home loan rate is critical. As is paying off your home faster while rates are lower.
The last official cash rate drop made by the Reserve Bank of Australia (RBA) was in April of 2015. This drop saw the cash rate fall to 2
. However, the average variable home loan rate is around 5.19
. For home loan holders who have a $300,000 loan over 30-years, this equates to a payment of $1645 per month. Based on the same loan amount over 30-years, the average fixed rate home loan is around 4.32
. This rate then reduces home loan repayments to $1488 per month, which is a saving of $157 per month. This equates to an extra $1884 per year that the home loan holder can pay off their mortgage, providing that their lender allows them to make extra repayments.
The key to getting on top of your mortgage, say financial experts, is to review what market averages for home loans are and to then look at what you could possibly be paying per month if you had a better rate. Home loan comparison calculators are an excellent way for you to calculate your savings.
Just remember that the home loan market is extremely competitive and that there are a lot of fixed rate home loan packages on the market that are well below the average variable rate, even when you look at the comparison rate of home loans. At present, for owner-occupiers fixed rate home loans can be as low as 3.79
, with a comparison rate of around 4.74
. Some fixed rate home loans even come with a redraw facility and no application fees.
But, before you consider any home loan change you need to review your current personal and financial situation and crunch the numbers. It’s also vital that you read any documentation, especially the fine-print, as this will highlight any hidden costs and charges. Otherwise, a home loan move could cost you a lot more than you bargained for.
You should only consider refinancing if, after crunching the numbers, you make a considerable saving, especially long-term. A short-term saving is irrelevant when you’re talking about your home loan because they typically span over 25 to 30-years. So if you’re going to switch home loans, then you need to think well into the future. If you’re looking to stay in your home and are not thinking of selling, then a fixed term could be a viable option. Otherwise, stick with a variable rate.
Variable rates give you greater flexibility. You can pay as much off your home loan as you wish without any penalty and you can buy and sell without having to worry about break fees.
If you’re unsure of what options are available to you, how to review your existing home loan, and how to research the market, then consider using a mortgage broker. A broker takes the hard work out of looking at your options and they can review your existing mortgage and your current situation. Then they find the most suitable mortgage for you. A broker will also answer any questions you have and can help you to make sense of the home loan industry, which can be confusing.
eChoice have brokers across Australia that can help you to make sense of not only the mortgage market, but they can also help you find a home loan that is more affordable. eChoice, who is an award winning brokerage, has more than 25 lenders on their panel. These range from major Australian banks, such as NAB and ANZ through to smaller building societies and credit unions. As a leader in the home loan industry, eChoice brokers are able to compare 100s of mortgages and then tailor their selections to suit your situation.
Do you want to know how you can reduce your mortgage faster? Then contact eChoice today.