The problem with only focusing on rates
Most peoples aim is to pay off their home loan as possible. The problem is most people focus on the interest rate when looking for a home loan as they assume a lower rate means they will pay their loan faster. Rate is certainly important but there are a number of factors that will impact the overall cost of a loan and how quickly you can pay it off.
Say for example you had a $350000 loan and fixed in for 5.3% for 3 years this would mean you could only pay in an extra $64 a week. At the end of the 3 year term the maximum the loan balance would be reduced to $323735.
If instead you had remained on variable for the next 3 years at say an average rate of 6% but could pay in $120 extra a week the loan balance after 3 years would be $315839.
For example for a $350000 loan with a rate of 5.5% and extra payments of $120 per week could expect to reduce to approx. $314500 after 3 years.
For a couple on approx. $85000 a year using an offset account with a rate of 6% they could reduce the balance to $277799 after 3 years. In fact even if the rate was 7% the loan balance would still be $288368 after 3 years.
Hopefully the above illustrates that rate alone is not the be all and end all when it comes to properly structuring your loan.
IMPORTANT: The examples used are for illustration purposes only and are not a guarantee of a specific outcome and are not specific advice. We recommend you contact us to seek specific advice regarding your situation before making decision with regards to your loan structure.