Refinancing can save you money and ensure that your home loan meets your current needs – but once you’ve refinanced, don’t immediately forget about it. Continue the momentum, keep the following things in mind, and you’ll soon be getting the most out of your new home loan.
Increase your repayment amount
If refinancing your home loan has resulted in smaller repayment amounts (thanks to a lower interest rate), then make the most of it by continuing to pay the same amount you did on your old home loan. Paying more than the minimum amount required will help you pay off your loan faster, and it will also reduce the amount of interest that is added to the balance.
If you refinanced to a better deal because you need the extra money for other things and you’re not able to add extra to your repayments, don’t panic. Think about if there are certain times of the year when you have a little bit extra money that you can use to help instead. A tax refund or a bonus from work can still help reduce the amount of interest you pay if you put some of it on your home loan.
Increase your repayment frequency
Making repayments monthly? Did you realise that you could squeeze in some extra repayments every year if you switch to weekly or fortnightly repayments?
Here’s how:
There are 12 months in a year, but there are not 48 weeks (12 x 4). There are 52 weeks and 26 fortnights. So, by swapping to fortnightly or weekly repayments you could be making the equivalent of 13 months’ worth of repayments in a year.
Once again, this can help you pay off your home loan faster, and reduce the interest being added to your loan too. Our home loan repayment calculator is a useful tool if you want to see the difference you can make to your outstanding loan amount.
Pay down debt
It’s not just your home loan that refinancing can help you with. If you have other debts from personal loans, credit cards or car loans then a reduction in your minimum home loan repayment amount could mean you can clear these sooner – or at least reduce the interest.
Some people like to tackle the debt with the highest interest rate first, while others focus on clearing smaller debts so there are fewer individual repayments to be made. Considering how reducing each debt could impact your financial situation will help you decide on the method that suits you best.
Create a safety net
It’s often easier said than done but having a financial safety net – or emergency buffer - could mean less pressure on your finances if your circumstances change in the future. Knowing you have savings will offer you peace of mind when it comes to the unexpected.
If your home loan has an offset account, utilise it! Using it for savings can not only help you reach your savings goals, but the more you have in it the more it will offset the interest on your home loan.
Alternatively, open a savings account or a term deposit. The rise of interest rates hasn’t just affected home loans which means you can enjoy a better return on savings with the higher rates being offered.
Whether you are interested in refinancing, or opening a savings or term deposit account, we can help. Contact us on 13 25 77 or visit your local P&N Bank branch.