With inflation rising and fuel prices ballooning threatening taking the cost of living even higher, there’s one more aspect of our finances that might shock us in the long-term – mortgage interest rates. With mortgage interest rates at the lowest they’ve ever been in this country, there’s only one direction they can go, and that’s upward. Some banks such as the NAB have already raised their interest rates.
If you’re a homeowner and want to save money on interest – or get into your first home – here are some tried and true methods to help you on your way.
Move to an offset account
If you can, move your mortgage to an offset account instead of a regular mortgage. This means your savings are “offset” against your mortgage balance – if you have $500,000 left on your mortgage and $50,000 in savings, you will only pay interest on the remaining $450,000. This can reduce monthly repayments or years off your mortgage.
Refinance lower rates now
If you haven’t checked your interest rate or loan package in at least two years, you should look into home loan refinancing. Don’t let loyalty to your bank cloud your judgement – shopping around for different mortgage rates could save you thousands, if not tens of thousands in interest. As of writing, the official RBA cash rate is 0.1%p.a. – but with inflation increasing, it seems likely that rates will rise as well. If you play your cards right, you could lock in a super-low interest rate on your mortgage for the next few years without being caught out by price hikes.
Consolidate smaller debts
If you have a lot of smaller debts snapping at your heels, you may want to roll them into a refinancing package instead. This can help you save money on high interest credit card balances. This is helpful if you are struggling to pay over the minimum amount each month. Be sure to do the maths before you commit – adding more to your home loan balance over many years may cancel out the potential savings; so weigh up whether it will make a dent in your mortgage or whether you should go down the traditional personal loan consolidation route.
If you are having trouble paying your home loan due to financial hardship, you may be able to access loan modification. This means a lowering of the interest rate, principal, or monthly repayments. You don’t need to be at imminent risk of default to access the program – but you may have to show you will have difficulty in paying back the loan in the future.
Queensland housing finance loan
If you are having trouble raising a deposit and are a low-income earner, you may be able to access the Queensland housing finance loan. If you have good credit and regular income but are having difficulty getting a loan from a bank or traditional lender, this may be a viable option. There are conditions of course – read the entire fact sheet at the Queensland Government site here.
You could also take up loans and grants from the Department of Housing and Public Works such as home loan grants and mortgage relief loans. Check them out here.
The information presented here is general in nature and should not be a substitute for professional financial advice.