Pay off your home loan sooner
Reserve Bank governor Glenn Stevens has echoed the sentiment of Loan Market’s executive director, John Kolenda, by suggesting that although interest rates will remain low in the near future, borrowers should be prepared for an interest rate rise later in the year. In anticipation of this predicted rise in interest rates, borrowers should look into the options available to assist them in paying off their home loan sooner.
Make extra repayments
If monthly repayments drop because interest rates have fallen, try to maintain the old repayment levels. This means you will pay off more of the principal with each repayment, reduce the term of your loan and the total amount of interest paid.
If you have savings that you do not need to access, consider making extra lump sum repayments on your loan. By making extra repayments you will be paying more off the principle of your loan and therefore reducing the interest payable over the life of the loan.
Remember, you can always use a redraw facility to redraw the extra funds whenever you need them.
Make your repayments fortnightly or weekly
As most loan interest is calculated daily and deducted monthly, by making your repayments fortnightly or even weekly, you could actually save interest over the life of your loan.