With inflation remaining high, interest rates are likely to stay at elevated levels for some time. For borrowers, this means they are going to face higher mortgage repayments for the foreseeable future.
Some simple actions that can be taken to help ease the pressure.
An offset account allows you to park your extra cash or savings, and then the mortgage’s interest charged is calculated based on your
loan minus the balance in your offset account. The higher your offset balance, the lower your interest costs, which means you can
pay off your loan quicker.
Fortunately, some lenders offer the option of having multiple offset accounts, allowing you to reduce your payable interest with every
dollar saved in these accounts. This way, you can maintain budgeting flexibility while still reducing your mortgage interest.
When you have a healthy offset balance, it's easy to become comfortable and indulge in extra spending. To stay on track and motivated, set an offset balance target or any amount that suits your goals. These funds are available in emergencies but are otherwise locked away, ensuring that you save on interest costs.
If you have good budgeting skills and discipline, you can use the credit card for your monthly living expenses and pay it in full at the end of each month. This strategy keeps your money in the offset account for as long as possible while avoiding interest on the credit card.
This approach gives you greater control over your outgoings and helps you identify any reckless spending as it happens. By sticking to a budget, you can stay on top of your finances and minimise unnecessary expenses.
Lastly, don't forget to review your home loan rate regularly. Your lender may offer new deals or rates that could save you money. A simple rate comparison by your mortgage broker can help you identify opportunities to refinance or negotiate a better deal.
Working with a mortgage broker can help make the process easier and help you find the best products for your needs. Remember, you're not locked into your existing lender, and you can move to another one if it makes more financial sense.