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[MoreMore Insights] Mortgage Repayment Tips


In 2023, there will be approximately 880,000 Australian households facing their mortgage fixed rate expiry. And these households had been hit by 10 back-to-back rate rises from Reserve Bank of Australia. For instance, a 1-million mortgage monthly repayment, has increased from $3800 to around $6000, and that's more than 50% increase. And these households find it very difficult to refinance too due to the decreasing borrowing power, and now face fixed rate mortgage cliff.


Today we will have a look at some mortgage repayment tips under the current situation.


Use of Offset Accounts


An offset account has link to your home loan that can help you pay less interest on mortgage and reduce the time to repay the loan. It is a daily trading account with a balance that can offset the home loan, only paying the interest on the difference between the balance of the offset account and the home loan. If you have $100,000 offset account balance and $800,000 home loan, you only need to pay the difference between the two, which is $700,000 in interest. In this way, your payments will be reduced and the loan will be paid off more quickly. The more money you put in an offset account, the less interest you have to pay, so it’s a good option to put your salary into the account regularly to help pay off the loan faster.


Increase the Monthly Repayment Amount


Also, each payment can be a little larger than the regular payment, which is an easy way to pay off your loan faster. The extra payments don’t need to be much, as even an extra $100 will make a big contribution to paying off the loan. Increasing your regular payments will be your advantage if interest rates rise in the future. However, be aware of whether you can make additional payments, as some loans may come with a no-prepayment treaty.


Seek a Loan with Low Interest Rate


If you feel that the interest rate on your current loan is high, call your bank and negotiate whether you can get a discount as a existing customer of the bank. If the bank agrees, the interest rate on your loan will be reduced; if the bank does not agree, you may choose to refinance with a lower interest rate. When you decide to go with another bank, make sure that the cost does not exceed the interest you can save on your loan.


Stay Informed of the Mortgage Market


The attitude towards the loan is a big deal, so keep current on what’s happening in the mortgage market and make repayments on time. Then it is possible to find some latest opportunities to help you stay ahead of the game. For instance, you keep a close eye on the interest rate and notice it increases, then you could be the first to take actions.



Avoid Choosing Interest-only Loan


The interest-only loan may not be a good idea for home loan borrowers. Apart from the higher interest rate, holding an interest-only loan means you will not actually pay down the loan because you only pay the interests during the set period, and the principal does not go down.


Check-up Your Loan Regularly


Checking financial health at least once every two years is important to every loan owner. Because it is a good way to make sure your home loan is still the right product for you. And reviewing loan regularly is crucial for exploring some better deals. You can potentially shorten the period of your loan if you find a better deal at the earliest time.



Don't be Afraid of Smaller Lenders


As the property market is picking up, many small non-traditional lenders come up and also do well compared to the traditional lenders. Some small lenders may sound unfamiliar to us, but they may have greater advantages in lending policies or interest rates. And these reasons are worthwhile for us to contact them.


Increase Passive Income


Passive income refers to the income that can be obtained automatically without spending too much time and energy or taking care of it. For example, learning financial management knowledge and choosing safe and reliable financial products can increase investment returns. Investing in a small amount of money for simple decoration of an investment property can not only increase rental income, but also help you find high-quality and stable tenants. Also, having a second job, or geting more overtime, can help you repay your loan more calmly in advance.


Contact Us!


MoreMore Finance is a professional financial company with extensive mortgage broking experience. We will devote ourselves to look for the best financial plan for you and shorten your home loan lifespan with our best effort. Contact us now to make an enquiry. Let us help you to save more, borrow more!


 
 
 

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