Tag Archives: home loan advice

Should you wait before fixing in your home loan rate?

After an interest rate cut, it’s common for borrowers to start asking whether or not it’s a good time to lock in a fixed home loan rate.

Getting a fixed home loan is always a little bit of a gamble, and most borrowers are reluctant to opt for a fixed rate unless they are fairly certain that rates are at the bottom of the cycle.

Rates could go up or down

Without having a crystal ball it’s hard to know if rates are as low as they will go, but economists are predicting that there will at least be one more interest rate cut this year. It’s predicted that the cash rate will drop by another 0.25%, bringing the current cash rate of 1.75% to 1.5%.

However, those who decide to wait for interest rates cuts are running the risk that rates will instead go up and they may miss out on the best deals.

Keep in mind too that the banks are aware when rates are about to go up and will adjust their fixed rates accordingly. You can generally get the best fixed-rate deals before the official cash rate reaches the bottom of the cycle. 

Rates may not go much lower

The official cash rate is already sitting at a historic low and while it is expected to drop by a further 25 basis points before the year is out, many economists have doubts about rates going any lower than that. Anything is possible, but you do have to wonder how low interest rates could go (and indeed how low individual banks are prepared to go).

Banks may not pass on cuts

Even if interest rates go lower, it doesn’t mean banks will pass on the cuts. In recent times we have seen the banks move independently of the RBA and it’s likely that they will continue to do so, meaning there is no guarantee that mortgage rates will get any lower.

Take advantage of good deals when you find them 

Don’t let a good deal pass you by because you think it’s worth waiting around for one that’s potentially better in the future.

Banks and lenders are currently battling it out to provide the best deals, providing a great opportunity for borrowers to shop around and find the best fixed or variable rates right now.

If you’re looking to change home loans and aren’t sure where to begin then feel free to come in and have a chat to us at Professionals Mudgee Real Estate for our recommendations on which local banks and brokers you should be talking to.

How to pay your home loan off faster

With interest rates at an all time low and forecasted to go even lower in 2015, many homeowners in Mudgee are taking the opportunity to get ahead on their home loan repayments, and rightly so!

The sooner you pay off your home loan the better as it helps reduce the amount of interest you’ll pay overall, and once your home loan has been repaid you’ll have more financial freedom and peace of mind.

Sometimes small little tweaks to your repayments and the way you spend can help shave years off of your mortgage.

Below we’ve provided some ideas that could help you pay your mortgage off sooner, but we recommend seeking the advice of professionals before making any major financial changes.

Make more frequent payments – If possible, try to make your mortgage payments fortnightly instead of monthly. By doing this you can cut down on the amount of interest you end up paying over the life of your loan. Just keep in mind that not all lenders allow fortnightly payments, so check first.

Utilise lump sum payments – Received a lump sum of money from a work bonus, tax return or anywhere else? Great! This can be parked in your mortgage account to help cut years off of your repayments.

Don’t reduce payments when rates drop – It can be tempting to pay less on your repayments when interest rates fall, but if you’ve been affording the current amount then why start paying less? It might only mean that you’re paying an extra $20 or $50 a month, but every little bit towards your loan helps reduce the amount of interest you pay overall.

Use an offset savings account – An offset account helps you pay off your mortgage faster by allowing you to use the money you put into the account to offset the balance of your home loan. If you can keep a decent amount of money in your offset account, you could cut years and possibly thousands of dollars from your home loan.

Review home loan products regularly – Your financial situation changes over time, as does the mortgage products available on the market, so you should be performing regular mortgage health checks. You may find that there is a better home loan deal out there or a product better suited to your needs. Talk to mortgage providers to find out what they have to offer. Just remember that there can be penalty fees for switching home loans, so keep this in mind.

We hope that our advice can help Mudgee’s homeowners pay off their home loans faster. For those who would like to use their increased equity to help fund a new home you can find homes for sale in Mudgee at our website, professionalsmudgee.com.au.