July 2011 – Peach Home Loans

Cutting years off your home loan and drastically reducing your interest repayments is not necessarily the impossible task some people see it as, according to one property writer.

Very few of the millions of Australian homeowners are currently managing to make their final payments in advance of original projections, but “living mortgage free is not a pipedream”, says Alex Tilbury of News.com.au.

In an article titled Cut Years Off Your Home Loan, Tilbury asserts: “You may only need to find an extra $200 to $500 every month so that you can exceed your mortgage payments.”

Tony Meredith, Suncorp Bank executive manager of personal lending told the publication that people might be shocked to learn just how much money they spend on coffee, eating out or ordering takeaway.

“By paying even an extra $20 per fortnight off your mortgage, you can make a significant difference to the balance,” Meredith said, whilst also suggesting that significant lump-sum deposits such as an entire tax return can cut months of a mortgage and save thousands of dollars each year.

For mortgage refinancing or advice it is advisable to speak to a mortgage broker, who can talk you through every step of the process on your way to maximising the impact of repayments.

The best thing to do with spare cash is to put it towards paying off your Sydney home loan more quickly, according to financial planning experts.

Making additional mortgage repayments is the best way to put yourself in a better financial position

Andrew Heaven of AMP told the Sydney Morning Herald: ”You can’t save and have debt at the same time.”

Putting money on the mortgage has the benefit of low investment risk, low costs and the effective investment returns will beat just about anything else on the market, he said.

Financial planner Greg Pride agreed: ”To generate an after-tax return of seven per cent you would need a ten to 12 per cent return elsewhere to beat knocking out the mortgage,”.

He explained that putting $5,000 into your mortgage redraw or offset account is effectively earning an after-tax return equivalent to your home loan interest rate.

Mr Heaven also recommended creating an offset account tied to the mortgage if you do not want to tie up the money in the home loan directly.

One suggestion is to have your pay go straight into the offset account to save interest- the money in the account reduces the balance of the mortgage on which interest is calculated.

Archive July 28, 2011

Paying off your mortgage early is “not a pipedream”

Put your money on your mortgage