You will be very pleasantly surprised how much influence you can have over how much interest you are actually paying on your home loan. Of course, banks and financial institutions will not like me for saying this. It’s a bit like trying to get a better deal for your energy or insurances and sometimes that means moving providers or suppliers.
I am sure some of us have encountered this before, where we make a few enquiries to compare rates and suddenly finding out that the original provider decides to offer a discount or a rate comparable to their competitors. I have actually saved hundreds from my cars insurance and energy bill just from bringing competitive prices to my original provider and them matching it. You’d have to compare apples to apples of course.
Be wise with your money as it can have a significant impact on the overall cost of your repayment and really determine and affect your financial future. You also want to know that the compound effect on reducing your loan can make a big difference as you extrapolate that over the years
So, how does the interest rate on your current mortgage for your home loan compare to the average home loan interest rate across the board? What if you found out that there can be now up to 2 per cent difference between the lowest and highest home loan rates! You really need to constantly and consistently compare and review your loan, and get a better deal if you can as it can save you thousands in the long term.
Be wise with your money as it can have a significant impact on the overall cost of your repayment and really determine and affect your financial future. You also want to know that the compound effect on reducing your loan can make a big difference as you extrapolate that over the years. Banks and financial institutions are now expecting most loans to cover interest and principal, so every percentage counts to make sure you are making the best use of your money and getting the best return on your investment.
Let’s have a look at what a small difference in the interest rate of conservatively say at 0.5 per cent can make on the overall total interest payment over the lifetime of the loan. I am going to use a 25-year loan and compare it with an average median price of $1.1 million for a two bedroom in Sydney. I’ll also use an 80 per cent LVR (Loan to Value ratio) as supposed to LIR (Loan to Income ratio) in this example with no extra repayments and assuming all associated fees (application fees, loan establishment fees, legal fees, ongoing fees, additional repayment fees) are comparable. It is also worth noting that banks are now only allowing for interest only loans for a maximum of five years before reverting to interest and principal.
The comparison is an example of two very real scenarios which shows a significant difference of $75,888 between the two rates of a difference of 0.5 per cent! This can be even more prevalent if you have multiple loans. It is ever so important to consider investing some time to talk to your bank or financial institutions and ask if you can get a better rate. If not, there are multiple bank and lenders that would only be too happy to be competitive and give you better interest rate. Do be aware of some associated exit fees if there are any but it is worth considering the bigger picture, especially if you can save on the long term. Sometimes all it takes is a phone call.