by Greg Carroll

1. Get your situation reviewed
If you have been in your current loan for 3 years or more it can be worth getting your situation reviewed. Because the marketplace is competitive and changes regularly. Your needs and circumstances have also likely changed. So it makes sense to see if your current set up is still the smartest use of your money.

By talking to me at MTA Finance I can assess your situation across a broad range of lenders to ensure your home loan is competitive. I look for ways to save you money, improve your cashflow and accelerate debt reduction.

When you talk to me you are dealing with an expert with 27 year’s experience in business and finance.

Best of all it costs you nothing to arrange a review. So contact me today.

2. Learn the power of $20
I can’t start my day without my takeaway coffee which costs me around $20 a week. Doesn’t sound like much but if you take that $20 and put it into a $350,000 home loan it would cut the term by almost 3 years.

How good would it be to own your home 3 years sooner?

People are often chasing quick fixes but just making small changes can make a big difference.

3. Cheaper is not always better
It can be tempting to jump at a cheap rate but a low rate won’t necessarily mean you pay off your home loan faster.

The main factor that will determine how fast you can pay your loan off is your ability to make more frequent payments above the minimum repayment required. More payments at a higher repayment amount means less interest charged to the loan which reduces the loan term.

If your low rate is a fixed rate for example then you may not be able to make additional repayment or they may be limited. Which means you may have lowered your minimum required repayment but you can’t take advantage of the lower rate by paying in extra.

Your low rate may also not allow a 100% offset account which would have allowed you to use every savings dollar to reduce the amount of loan interest you are charged.

If on a $400,000 loan you maintained an average offset balance of $20,000 you would end up paying $10,000 less interest even if your home loan rate was 0.5% higher than a rate without an offset.

It highlights the importance of point number 1 – getting your situation properly assessed. You need to ensure the loan structure you have is actually working in your favour.

4. Consolidating debt
If you have credit cards or personal loans sitting on higher rates it can make sense to roll that lending into a home loan to reduce your interest and get it more manageable. It’s about taking stock of your whole situation. If you tally up all your repayments and it is possible to reduce the overall figure through consolidation it could be worth it.

Saving $500 a month could cut over 10 years off the life of a loan.

5. Beware 0% or low rate finance on motor vehicles
A new car bought with a zero per cent interest rate can be dearer than the exact same vehicle purchased at a discounted price with a regular finance rate.

A recent example showed a car brand was available with 0 per cent finance but the deal was linked to a $24,990 drive away price. The same car was previously available for $19,990 drive-away.

With a regular interest rate of 8 per cent, the total repayments are in fact lower than the 0 per cent deal. A car loan for $19,990 paid back at 8 per cent interest over three years amounts to repayments of $624 per month and a total cost of $22,449, not including any establishment fees or extra charges.

But $24,990 paid back at 0 per cent interest over three years amounts to repayments of $694 per month, an extra $2541 over the life of the loan, according to the online calculator.

That’s extra money that could have gone into your home loan. Also it’s worth considering whether you use a home loan to fund your vehicle purchase if you have available equity. My only proviso is that you seek to repay the loan over a 3-5 year term.

6. Adopt a high interest mentality
While getting into the right loan with a low rate will put you on the right track there’s no reason to pay back your loan at a cheap interest rate. You’re much better off pretending it is a couple interest points higher, and paying it off at a higher rate. And if rates should increase in the meantime, it won’t come as a shock to the budget.

Get more than just a low rate
If you are looking to purchase property or want to review your existing lending it is worth talking to us to get your home loan options properly assessed. We not only look at your interest rate we can also assist with developing a longer term plan focused on your financial goals.   Contact us to discuss you plans.