Undeterred by a steady cash rate, abundant retail store sales and holiday destination discounts, many Australian borrowers are determined to save these Easter holidays.
A national survey by Mortgage Choice of first homeowners who purchased in the last two years found 32% will spend less during the Easter holiday period compared to last year. 54% will spend the same and only 14% will spend more*.
Spokesperson for Mortgage Choice, Kristy Sheppard, said, “Taking a battering from the November rate rises and recent hikes to other living costs while witnessing, and in some cases experiencing, the destruction of natural disasters means a leaner, more conservative Easter for many Australians.”
“Our 2011 Recent First Homeowner Survey found almost one third will spend less this Easter and only one in seven will spend more, despite five months of steady interest rates. Borrowers are determined to either put money back in their hip pockets or make sure their outgoing cashflow doesn’t increase.
“Astute mortgage holders are spending less to repay their debts sooner and create a savings buffer. Some of these and other borrowers may be unaware there are repayment strategies that reduce the overall interest owed on their home loan by utilising their savings, knocking time off the loan term.”
Borrowers looking to save more on their home loan this Easter can adopt these three steps:
1. Double your savings. An offset account or redraw facility puts regular savings to good use. Adding extra funds into an offset account reduces the interest owed and the loan term. Plus, funds are not taxable whereas interest earned from an ordinary savings account is. Alternatively, if your loan has a redraw facility you can reduce your interest owed and loan term by paying extra into your loan account and redrawing this if necessary. Keep in mind some lenders request a minimum redraw amount and/or charge a fee per withdrawal whereas others may have unlimited redraw. Consider the outcome if you contributed savings (big or small) via a lump sum deposit into your offset or loan account after each holiday.
2. Save on the extras. Review your loan’s features and fees to see if you are paying a higher price for things you don’t need. For example, many professional packages give you access to a wide range of loan features, which is great if you use each of them to your advantage. However, it may be that a more basic loan suits your needs and reduces your costs. Be sure to weigh up the expense of switching home loans with the rewards.
3. Dare to compare. Possible savings made by switching to a loan with fewer features isn’t the only reason to review your home loan regularly. Utilising loan comparison websites such as HelpMeChoose.com.au can help you determine if a cheaper and better suited loan exists. When doing so, remember to compare the features, interest rate and fees of each loan plus the cost of switching lender and/or loan. Your comparison needs to ensure the long term savings and benefits outweigh the expense of moving.
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