 Managing your mortgage
If you receive a cash handout as part of the government's stimulus package, deciding how to spend it is important.
Home owners may try to put as much of it as possible on the mortgage, and reduce debt, which is a sensible choice.
Kevin Rudd may want us to spend it all to get us out of the looming recession, but Laura Menschik who works with WLM Financial Services says paying off debt should be a priority.
Repaying credit cards should be first on the list due to the huge interest rates. Most are still more than 12 per cent so decreasing this debt makes financial sense.
"Increase savings or reduce a home loan. Paying off more than absolutely necessary on a home loan lowers overall interest payments, gives you a buffer for lean times and, if there is a re-draw facility, you can pull out the overpayments later if needed." she advises.
With interest rates 400 basis points lower than last September home owners are already breathing a sigh of relief. However, some are still paying their mortgage off at the higher amount deliberately, in an attempt to reduce the debt quicker.
By paying more than the minimum amount required you can save on interest and reduce the term of the loan by several years.
Join the discussion on Everything else about home loans
|