 Spend bonus wisely
For everyone who is eagerly awaiting their $900 bonus to arrive in their bank accounts, the advice from financial experts is to put it towards the mortgage or other debt.
Some Australians are understandably rubbing their hands with glee, imagining the shopping spree ahead, or are busy making room for the new plasma TV in their living room.
However, a recent Business Day article points out that putting this sum towards a $350,000 home loan on a standard variable interest rate of 5.96 per cent over a 30-year period could generate total savings of $4,435, reducing the term of the loan by two months. Meanwhile, Louise Biti, director of financial planning consultants Strategy Steps, claims that those using the $900 to reduce debts on a $2,000 credit card bill where only the minimum payments are being made could not only see the term of payments be cut by almost 11 years but also save them somewhere in the region of $3,036 in interest and fees.
Kevin Rudd may want us to spend it all to get us out of the looming recession, but Laura Menschik of WLM Financial Services says paying off debt should be a priority. She says home owners should not feel guilty for putting as much of it as possible on the mortgage, and reducing debt.
Figures from a recent Real Estate Institute of Australia Housing Affordability report show that housing affordability has improved since the last quarter and the aggressive rate cuts have given some relief to home owners, while a boost to the first home buyer grant has helped many first home buyers to get into a housing market that had previously been unaffordable.
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