I’ve been a mortgage broker for nearly 16 years now. Each year, like clock work, we see articles around January about how people should be saving more on their home loan mortgages interest rates. It’s the same over and over again!
Don’t get me wrong – this is definitely important – but why do we want for a new year to review our loans? Is it because we’ve spent too much over the festive period, or is it because we have a few days at home to analyse things? Whatever the reason, a lot of people focus on their finances at the start of the year.
Do you know how much you’ve paid off your home loan over the last 12 months?
One thing to focus on is your home loan balance goal for the year. Look at how much you paid off your mortgage last calendar year, and set yourself a challenge in 2021 to get your home loan balance down to a certain amount. Make a note on your phone as of today, pencil in your current balance then in 12 months time see how much progress you’ve made.
The amount of money you can dedicate towards mortgage repayments really does depend on a variety of factors such as your income, your cost of living expenses, and of course your interest rate.
According to echoice a rule of thumb is 28-30% of your income should be going towards your mortgage repayments. This is where your budget comes in – knowing your income and expenditure in intimate detail and adjusting your spend towards your biggest goals. (You can head to our website for a budget planner tool, or consider looking into our SWB Money Hub app to automate the process for you).
Once you’ve done this then compare how much is going towards your mortgage.
After addressing the monthly budget, I then recommend reviewing your interest rate. It alarms me that only 46.5 per cent of Aussies know their current interest rate and apathy appears to be increasing with fewer Australians knowing their rate in 2020 compared to previous surveys, according to data from Mortgage Choice.
Speak to your broker or our team at SW Brokerage to see if there is anything better available. In 2019/20 we had existing clients come to to review their loan and we approached their existing bank/lenders for a better deal and most times achieved a discount through our relationships and processes. (We saved these existing clients (combined) over $100,000 a year in interest rate reductions)
If you had a home loan rate of 3.99% and a $600,000 mortgage, and you negotiate a .50% discount from your lender,this saves you approximately $170 a mth. If you are a person who thinks you can’t afford a holiday at the end of the year, you could save that $170 over 12 months and you’d have $2000 savings. Or those savings could be paid towards your mortgage to reduce the balance even more quickly.
So my challenge to you is to set a target for your home loan balance at the end of 2021 and take the steps (or get the support) to work towards that goal. You’ll be surprised at the opportunities that come with it. Be patient!