The finance industry is one of Australia’s most competitive with new products launching almost every month to win customers.
Its focus on innovative ways to help Australians achieve their financial goals means the loan you took out ten or even two years ago may no longer be the best deal in town.
As an experienced mortgage broker, I’m constantly researching new loan structures. If you’re looking to refinance, here are some ideas of new products on the market and ways to get your mortgage paid faster.
- Fortnightly payments. By altering your repayment schedule, you could save the equivalent of one month’s mortgage bill every year. Weekly payments make an even bigger dent so it’s worth considering the repayment options on your loan.
- Extra payments. Putting a pile of cash on your loan will dramatically reduce the interest you’ll be charged over the specified life of your loan. Consider setting aside your tax refund, or an annual work bonus, for this purpose each year and you’ll be astonished as to the difference it can make.
- Redraw facility. This is an excellent solution if you believe you might need quick cash and want to claim back the additional repayments you made on your mortgage at an earlier date.
- Higher payments. Shorten the length of the loan by paying a little extra each month. Not every loan product allows you to do this. Some are geared to keep you in the deal for the specified loan period so if you think you will need this facility, it pays to state it up front.
- The “best” deal. Most people are attracted to the lowest interest rate when deciding on a mortgage, but be careful. You might need payment flexibility, minimal fees and access to equity in your loan at some stage in the future, and the cheapest loan is not always the best value.
- Offset account. This is a savings (or transaction) account that’s linked to your mortgage. Its balance should reduce the amount you owe each month. This reduces the interest charges. If you’re a good saver, it can help you pay your mortgage off sooner.
- Interest-only . These loans are best for those under financial pressure but are determined to hang in there until better times return. Ultimately, please pay off the principal quickly or your loan will last for eternity.
- Loan portability. This feature offers the opportunity to move your loan to another property. It only works if settlement on your current home occurs on the same day as your new one. If not, you might need bridging finance.
- Loan splitting. You can hedge against interest rate fluctuations by having a percentage of your loan on a fixed rate while the remainder is on the variable rate. With record-low interest rates right now, it’s debatable whether this is necessary.
This article is provided for general information only and does not take into account the specific needs, objectives or circumstances of the reader. Before acting on any information, you should consider whether it is appropriate for your personal circumstances, carry out your own research and seek professional advice.