Over the past month, many home loan mortgage rates have fallen to historical lows. According to Simon Power, the Westpac NZ general manager of consumer banking and wealth, “it’s a great time for customers to get ahead by holding their repayments at the same level at which they have been paying.” Power has calculated that paying off an extra $150 a fortnight on a $500,000 30-year mortgage could shave up to 6 years off total repayments, and save over $106,000 in interest.
“If people are able to increase the amount they repay each fortnight or month by $50, $100 or even $200 when they re-fix, it can make a substantial difference to their overall interest savings” stated Power.
Milestone’s helpful tips for reducing mortgage interest costs include:
- Change your repayments to fortnightly instead of monthly. By doing so, you end up making two extra repayments per year, which reduces the amount owed and the interest paid.
- If cash flow permits, consider increasing your regular loan repayments, shortening the term of the loan, and consider paying lump sums off the loan when it comes time to re-fix.
- Consider having a portion of the loan on a floating rate or even a revolving credit type facility, enabling earlier repayment of that portion of the loan.
- Have your pay go into your loan account to help reduce the debt level for part of the month and progressively withdraw money during the month to pay bills. One needs to be very disciplined if this approach is to be followed.
- When interest rates drop, retain your existing level of loan repayments.