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With the RBA maintaining a low cash rate of 1.5 percent, there continues to be strong demand for home loans across the country. In November 2017, the value of home loans approved rose by 2.3 percent to $33.5 billion. Strong first home buyer activity was recorded in most states, with first home buyers accounting for 18 percent of the total owner-occupier commitments, the highest in the past few years.

 
Take control of your mortgage
 

The average home loan size for owner-occupiers was determined to be $388,900, which is 3.3 percent higher as compared to the same time the previous year.
Overall, home loans approved for owner-occupiers rose to $21.3 billion, up by 2.7 per cent, while investor loans increased by 1.5 per cent to $12.2 billion.


Owning your dream home

Indeed, it is heartening to see an increasing number of Australians realise their dream of owning a home. Or, is it? There is no doubt that the cooling house prices in Sydney and Melbourne, coupled with low interest rates and meaty grants offered by state governments have helped many first time buyers purchase a home. But, is it possible that Australians are taking more debt than they could handle?

Buying a home is not the same as ‘owning’ it, and you do not fully realise your dream of property ownership until you have paid the last cent off your mortgage.

Indeed, 2018 kicked off with brisk real estate activity, thanks to record low interest rates. However, the year also started with increased speculation about rate hikes in the near future. In short, home loans could end up being costlier for existing mortgage holders, meaning they would find themselves paying much more than they currently are.

To understand this better, take Tim’s example, who is currently paying the standard 4.5 percent on a home loan of $350,000 with a term of 30 years. If the interest rate increases by just half a percent, Tim would end up paying $105 extra each month than what he is currently paying. Any subsequent hikes would further drag this number higher, adding significantly to the cost of the loan.

With one-third Australian families already feeling mortgage stress, existing and prospective mortgage holders must pause and take stock of their finances before any unexpected rate hikes punch them in the face.

In view of the above, and general prudence, use the beginning of the year to get in control of your mortgage with these simple steps:

Borrow only what you can afford – Banks are required by law to lend responsibly and take into account several factors before deciding your borrowing capacity. However, only you know your actual situation – and the bank’s estimate could be more or less than what you can service comfortably. For example, if you are planning to start a family in the near future, it will add to your expenditure and affect your home loan serviceability. Thus, instead of borrowing the full amount available, you must calculate the size of the mortgage you can service comfortably to avoid mortgage stress in the future. Use this repayment calculator to get an idea of your monthly repayments by changing the size of the loan.

Pay more now to save more later – The easiest way to pay off your mortgage sooner is by paying a little extra each month, which will reduce the principle steadily, helping you save on interest as well as cut down the years from the term. Besides, right now is the best time to pay off your loans – considering your mortgage is cheaper at the moment. So, brace up and throw every cent you can at your mortgage and speed up your journey to financial freedom. Learn how to pay off your mortgage soon, here.

Choose the right home loan features – Very often, having the right home loan features can save you much more money as compared to a vanilla low interest rate mortgage over the complete term. Using an offset account is a popular option that can save mortgage holders thousands of dollars effortlessly. By merely keeping your savings in an offset account, you boost your savings considerably as your interest is calculated on the balance of the outstanding home loan minus the amount in your offset account (Read more).

There are several other features you can ask for in your home loan such as the flexibility to make additional repayments and redraws. A mortgage broker could help you with the right add-ons for your requirement, enabling you to choose the best home loan for your situation. Speak to a mortgage broker now.

Refinance to a lower rate – Contrary to popular opinion, refinancing is quick, easy and hassle-free, and can be a great solution to your financial woes. Yes, by looking around at what is happening in the mortgage market and reviewing your home loan regularly, you can negotiate a better rate with your existing lender or refinance to a better deal offered by another mortgage provider. Currently, as lender advertised rates hover around 5 percent, savvy Australians can score deals as low as 3.56 percent on mortgage comparison sites such as HashChing. However, before you refinance, we suggest you crunch the numbers to calculate your breakeven point to ensure you actually benefit from the switch. You can read more about refinancing your home loan here or speak to a mortgage broker online to understand your options better.


HashChing is Australia’s first borrower-friendly online marketplace offering hundreds of deals from over 60 lenders you can compare online apart from on-demand broker services on a robust online platform.

 

By Vidhu Bajaj,
HashChing Content Writer

 

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HashChing is helping Australians by providing access to the pre-negotiated home loan deals. Obligation free consultation with one of our partner brokers might save you time, hassle and money.