2017 has passed and we’ve survived a full year of Trump, Australia entered the 21st century and allowed same-sex couples to marry and North Korea continues to add tension with the threat of a nuclear war. It’s now 2018, and it’s time to ensure that you achieve your New Year’s Resolutions and ensure this new year is a financial success.
We’ve outlined our top 6 New Year’s Resolutions for you to consider to slash your mortgage and other debts.
- Get rid of those credit cards and bad debts
With most credit cards charging interest of 20%+, it’s important that you regularly ensure that all of your cards are paid off. Don’t chase pay the minimum as this can add months, if not years, to your repayment time frame, as well as significant interest costs. The same applies to any personal loans that you have outstanding. Make a plan to quickly repay these to ensure that you’re not paying unnecessary interest.
When it comes to reward credit cards, as a general rule of thumb, if you’re not spending more than S$12,000 per year on your card then you will be better off with a nil fee card rather than a rewards one. This is because of the annual fees that apply to most reward credit cards.
- Review your loan repayment schedule
How frequently are you repaying your current investment or home loans? Did you know that you could reduce your overall interest cost by making repayments weekly instead of monthly? You can read more of the detail and analysis in our recent post here. If you’re not currently making weekly repayments, call your bank or your mortgage broker and have them change the frequency of repayments.
Even by making fortnightly repayments instead of monthly repayments, you can actually increase your repayment amount given that there are 26 fortnights in the year, and only 12 months. This can amount to a substantial saving over time.
- Review your current interest rates
Are you currently getting the best rate you could be? If not, perhaps it’s time to speak with an investment savvy mortgage broker to discuss whether you could reduce your interest rates. A difference of just 0.5% for a $500,000 mortgage over a 30 year period can equate to over $50,000 in saved interest.
You could also consider whether to switch your loan to principal and interest, instead of interest-only. With recent pressure from regulators in Australia, most banks are offering more attractive interest rates for P&I loans, as opposed to interest-only, and often these differences can be greater than 0.5%.
- Set up an offset account
If you have spare cash that you’re unsure of what to do with, or that you’re simply keeping as a ‘rainy-day fund’, consider putting this into your offset account. An offset account is a bank account that is attached to your loan / mortgage account. Any funds that sit in this offset account will reduce the amount of interest you have to repay, allowing you to repay your mortgage faster.
With some lenders, it’s even possible to set up a partial offset account against your fixed rate loan. This allows you to take advantage of the peace of mind of a fixed rate, while also ensuring your savings are working for you in your offset account. You may also want to consider a loan split strategy depending on your circumstances, with a portion of your loan being variable and the remainder being fixed.
- Buy an investment property
Have you been considering buying an investment property but you’re not sure where or how to get started? Do you already have an investment property with ‘lazy equity’ that you’d like to ensure is working for you? By reducing your interest rate and structuring your finances appropriately, you may be able to add an additional investment property to your portfolio without dramatically changing your weekly cash flows.
We work with a number of property investment advisers for our clients to find and secure the right properties depending on their goals and circumstances. You can use our borrowing power and stamp duty calculators here to discover whether you can afford to purchase your next or first investment property.
2017 seemed to disappear in a flash, and with our lives becoming busier I’m sure 2018 will be the same. Outline your goals and new year’s resolutions, and start making steps to ensure that this new year is a financial success for you and your family.
LoanSuite Pty Ltd is your lending partner for all of your home loan, investment property, business and commercial financing needs. With our wide range of lending solutions, expertise in financial planning and investment strategies, and extensive experience in working with both Australian residents and Australian expats, we are your partners for your lending needs.
Book a obligation-free, complimentary consultation here today.
LoanSuite Pty Ltd is an Authorised Credit Representative (Credit Representative Number – 494608) of My Local Broker (Australian Credit License – 481374). Important Disclaimer: Your complete financial situation will need to be assessed before acceptance of any proposal or product.