In October 2022, Australia’s average owner-occupier home loan was just shy of $595,000. A loan that size comes with a hefty monthly repayment and interest bill to go. Assuming your rate is around 4.8%, that will cost you circa $533,000 in interest and take 30 years to repay.
Let’s say you want to reduce your overall interest cost and repay the loan before 30 years. Then, aside from reducing your interest rate, you should consider how to pay additional funds to increase your payments. Any additional funds you can pay onto your mortgage will reduce the length of the loan and overall interest cost.
Now for the Tip.
Consider using your tax refund every year to make an additional once-off repayment on your loan. Last year the average Australian tax refund was $2,900; imagine putting that money you didn’t need during the year onto the $595,000 loan. That simple action will save you just over $85,000 in interest and reduce the loan term by four years (assuming interest rates don’t change)
Of course, not everyone gets a tax refund of $2,900, but the principle remains. Find that little extra to put onto the loan each year to impact your overall financial position significantly.
Motivation is also essential. If you aren’t sure of the impact of additional payments you can make towards your loan, reach out, and we can show you!
