Interest rates are incredibly low right now. There’s talk of them going even lower in the next few months – but we’ll have to wait to see what our economy does and what the RBA decides to see if the speculation is right.
In the meantime, if you have a mortgage, there’s a couple of things you should consider to take advantage of these historically low rates.
Pay down debt
Low interest rates mean that many home owners can afford to pay more off their home loan each month. This creates a great financial buffer before rates go back up, which they will at some stage.
If you don’t already have a redraw facility on your home loan, talk to us. A redraw facility allows you to make extra payments, which will reduce the interest payable, but also allows you to withdraw the money in case of emergency.
Neutral to positive cash flow investments
Today’s interest rates make investing more affordable and manageable for many people, particularly in the lower end apartment market. Remember, when you’re doing your calculations, use the average long term interest rate of 7.21% or higher, just to ensure you’ll be OK when rates rise again. Property is a long term investment, so you need to be able to hang in there for the long haul. If you need investment advice, we’re happy to help or refer you to a specialist in this field.
A helping hand for first homebuyers
It’s smart to buy when we are experiencing record low interest rates. The first five years of holding a principal and interest home loan are the most expensive, with the bulk of your repayments going to interest. As the principal reduces, you will be paying less interest, so make the most of these low rates now. Consider a three or five year fixed rate below 5% and make extra repayment when you can – you just need to check that your fixed loan allows for extra repayments – or split your loan so that you can.
Whatever strategies you want to adopt, we’re here to help!
