Across New Zealand, home loans have hit their lowest interest rates in history. With the Official Cash Rate (OCR) dropping to 1% and two major cuts since May, this feels like just the beginning – and economists agree. As major lenders work towards increasingly competitive loan options, now may be the best time to take advantage.
But where to begin? Having the right strategies in place can keep things simple and give you freedom from debt faster than ever before. Better yet, these strategies don’t have to be big and life-altering; here are some simple, small solutions to get started:
Keep Your Repayments the Same
Since the interest rates have reduced from your last mortgage rollover, it may be a good idea to keep the same repayments this time so that you can start paying more towards the principal. This will give you the advantage of lower interest rates and thus reduce your mortgage faster without any change in the repayments. Reducing your mortgage repayments according to the new lower interest rate may not make a big difference in your cash inflow, so why not keep the same repayments and reduce your mortgage even faster?
Pay a Little More
It may seem a little obvious, but increasing your monthly or fortnightly repayments is always a good idea; even little amounts in each installation can build up to a big difference over time. In fact, it could end up shaving years off your mortgage plan.
This free online mortgage calculator can help you get an estimate of how much you could save in the long run depending on the extra payments.
Save Every Month
The easiest way to increase those repayments is to manage your spending in other areas. Some common drains on the household budget include food waste, unused clothing and credit card interest.
Keep an eye on unnecessary expenses each month so that any additional income can go towards repaying the mortgage. If the bigger picture seems a little daunting to tackle right away, try the smaller items like cutting out the takeaways, carpooling on occasion or looking for deals while shopping. Of course, no one’s saying that you shouldn’t do the things you love, but knowing where to spend and where to save is always important.
Understand Your Interest Rates
As we’ve mentioned, interest rates are lower than ever – but if you’re on fixed rates and haven’t reviewed your mortgage in a while, you may be stuck getting the raw end of the bargain.
The only way to start in the best position is to understand the competition and find the best rates in the market. When you are first applying for a loan, your mortgage adviser can align you with the right option for you. However, once you have a mortgage in place, knowing what interest rates you have and where you have the option to decrease them is key. Never be afraid to ask your mortgage adviser to find a better deal. The best advisers will always fight for your dream.
…
Before you take any of these steps, be sure to book in a review with your mortgage adviser to understand which option will suit best for you. Remember: peace of mind is the most valuable thing of all – especially when it comes to getting debt-free faster.
As mortgage and financial advisers, our combination of strengths gives us a unique and fully-realised vision of your mortgage freedom journey. We can show you some more options to take towards your mortgage freedom while keeping your financial future healthy. Talk to us today to schedule your next mortgage review.
| Copyright © 2019 Finance Matters NZ Ltd. All rights reserved. |