Kurri Kurri & Muswellbrook Blog

Chiefly, the aim of the game is to pay your mortgage off as rapidly as possible. By doing this, you can reduce the amount of interest you’ll be forced to pay, and it’ll put you in a position to make your next property move faster.

Therefore, it’s generally a savvy move to choose a home loan with a competitive interest rate and reasonable conditions and charges. If you’re not careful, monthly or annual administration fees can add to the expense of a mortgage over the long-term.

At the same time, you want a home loan that allows you to make extra repayments. Making additional lump sum payments when you have the money can save you plenty over the term of the loan, while making weekly and fortnightly (i.e. more regular) repayments can save you a stack of cash too. Additional features such as redraw and offset accounts can also be useful, as they help trim interest costs, and enable you access to some cash, should you need it to pay unexpected expenses.

Many home loans for owner-occupiers work on a “principal plus interest” basis – ‘interest only’ loans are usually used for investment property loans. In other words, over the term of the loan, whether it’s 25 or 30 years, you repay the (capital) principal, as well as the interest charged on the outstanding balance.

Drilling down, there is a wide variety of mortgage types such as “fixed”, “variable”, and “split” loans available to home buyers. A variable rate mortgage utilises an interest rate that generally (but not always) moves in tandem with the RBA’s cash rate. So, when interest rates fall, your mortgage repayments fall. However, if interest rates rise, so too do your repayments.

A fixed rate mortgage protects you against interest rate changes for an agreed term, whether it’s 1, 3, 5 or 7 years. This delivers some peace of mind as your repayments won’t change. However a fixed rate locks you in regardless of whether interest rates go up or down, while breaking out of a fixed rate loan usually costs an arm and a leg, depending on how far you are from the end of the fixed period.

Split loans are simply a part fixed and part variable rate mortgage. They are popular with homeowners who want to take an each way bet on interest rates. To find out more about how home loans work and to find the most suitable mortgage for you, contact Our Broker Financial Services at ourbroker.net.au or call 1800 913 677.