With the official cash rate at an all time low, interest rates on the typical standard variable rate mortgage are now dramatically lower than they were last year.
Some Australian households are now up to $600 better off each month when it comes to mortgage repayments..
This cash windfall has come at a time when many borrowers are doing it tough. But rather than living life a little better, this reprieve from high interest rates can offer borrowers the perfect time to create a buffer in their mortgage by driving the principal component down.
The lower the principal amount on your mortgage the less you’ll pay in overall interest. So how can you drive down your principal? Easy: as interest rates come down (and your interest repayments as a result should you be on a variable rate mortgage) keep your monthly repayments at the same level – every extra dollar will then go to reducing the outstanding principal.
This simple strategy can not only potentially save thousands in mortgage repayments it can take years off the life of your loan. The equity built up in your property as a result can be used for a range of uses, including underwriting an investment property.
If you’d like to discuss this as well as a number of other mortgage reduction strategies give me a call.
