With interest rates currently sitting at all-time lows, many Australian mortgage holders are taking the opportunity presented by lower repayments to catch their breath – and maybe splurge a little with that extra cash.
But while it can be tempting to treat yourself to a holiday or a new car, a period of low interest rates is actually the ideal time to reduce your debt as much as possible by paying down your mortgage.
A recent study by Smartline Personal Mortgage Advisors found that paying extra on your mortgage each week can have a huge impact on the life of your loan. An extra $100 per week on the average mortgage could save at least $115,000 in interest costs alone.
Paying less interest means more of your hard-earned cash is applied to your principal debt, which can take years off the length of an average home loan.
So while interest rates are low, think of your mortgage as a piggy bank – the more you put in now, the more you can enjoy the benefits later.
It will take some discipline, but maintaining your repayments at a higher level while rates are low will deliver greater financial security down the track.
Remember, though, that not all home loans are created equal – the structure of your mortgage can impact on the effectiveness of any additional payments.
Speak to your bank manager or financial planner to ensure your extra effort will pay the dividends you deserve.
The information provided in this blog is of a general nature only and in no way constitutes legal or professional advice, or specific advice in relation to any finance strategies. In all cases we recommend you receive professional financial advice for your own personal circumstances.