Problems with interest rates and repayments? Ask for home loan help.
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In simple terms the more you pay the quicker you will repay the debt however you can also save some interest and shorten the term by parking funds for periods against the debt.
The methods involve:
- Using a line of credit to pay your salary into temporarily lowering the balance but be careful as these can sometimes have higher interest rates or fees that negate the benefit and without the discipline of scheduled repayments they may never be repaid.
- Redraw facilities enable you to also park funds in the loan saving interest but still having access to them for a later need. For example many self employed borrower’s park funds earmarked for taxation payments in the loan account.
- Offset accounts are another way of saving interest. Some lenders allow a deposit account in exactly the same name as the loan account to be offset meaning that you only pay interest on the net balance of the two accounts. The ATO presently allows this meaning that the credit interest offset against the loan is not taxable income. Be careful with this arrangement as deposit funds that are greater than the loan balance may not earn interest at all and some accounts will only allow the deposit funds interest offset to be at the deposit interest rate rather than at the same rate as the loan.
- A loan structure that is tailored to the needs of the borrower is very important in saving interest. Lenders offer many products with fixed, variable and introductory interest rates. Taking a product that is unsuitable may cost you more in the future than a current short term saving.
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