Borrow smarter and stay one jump ahead of the banks

It sounds like the impossible dream, but if you do your homework, you can keep a much greater proportion of your money and give less to the bank.

With the official cash rate being at the lowest rate in recorded history, this is a very good time to make some impressive gains down the track.

Right now, the current rate cut has taken around $45 per month off the average Australian mortgage of approximately $300,000. So, with rates falling for nearly the last 2 years, many householders have saved thousands of dollars overall.

Staying ahead

What needs to be considered is that anyone with that $300, 000 mortgage paid off over 25 years (at the historical average rate of 7%) would end up paying around $630,000 in total – over twice the initial sum borrowed.

By reducing that repayment period to 15 years, you would save over $150,000 alone.

You can see where this is heading, can’t you? If you really want to win at the mortgage game, the best move you can make is to put those low interest rate savings right back into your mortgage. It’s not a sexy way to spend your money, but when you consider that it could save you tens of thousands of dollars over time, it’s clearly a very wise investment move.

By putting it back into your home loan, you build up a safety buffer (you never know what might happen around the corner, after all) and pay your home loan off much sooner. What’s more, when the rates do inevitably go back up again, you will be well prepared.

Smarter still

The banks are fighting hard for market share and now face further competition from the non-bank lenders, many of whom have far less overheads to meet than the major banking institutions.

So, take advantage of this. For example, you can re-finance your existing loan into a low-rate variable home loan, this will free up extra cash that you can re-invest back into your loan. This can easily save you tens of thousands of dollars over the loan period, without having any impact on your lifestyle at all.

You first. The bank second

Timing is everything and with interest rates so low, it’s time to weigh up your options and strike while the iron is hot. Do it right and you could be reaping the financial benefits for years to come, with you enjoying the returns, instead of your bank.

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