How to manage interest rate rises
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Following are some tips to help you stay on top of your home loan in a rising interest rate environment
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Make additional repayments
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Making additional repayments beyond what’s required in your minimum monthly repayment is one of the best ways to reduce the total interest paid and term of your loan. As a rule of thumb, every $1 in extra repayments you make early in the life of your loan saves around $2 in interest over the term of the loan, depending on the level of interest rates.
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Make lump sum payments
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Consider either one-off lump sum payments when you have spare cash or commit to increasing your regular repayment amount. At Easy Street, we allow up to $25,000 in extra payments each year. You can then access the money if your situation changes via the redraw facility attached to your loan.
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Make fortnightly payments
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Paying fortnightly instead of monthly will also take thousands off in interest over the life of your home loan. Why? Because there’s two extra repayments in a year when you pay fortnightly (26 times) than monthly (24 times, if split in half).
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Use a 100% offset account
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Another very effective way is to use a 100% Offset account. Simply deposit your salary into the 100% Offset account and any money in the100% Offset account is deducted from your loan balance before interest is calculated. Therefore any extra money in your transaction account saves you interest on your loan, thus shortening the term of your loan.
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