Borrowers debt free almost 10 years earlier
Borrowers debt free almost 10 years earlier
Posted on Monday, July 15 2013 at 3:42 PM
A whole new generation of homeowners and investors could be mortgage free a decade sooner, thanks to the low interest rates on offer at the moment.
A new study by
RateCity shows the majority of borrowers with a variable home loan are keeping
their repayments at the November 2011 levels, before rates began to fall.
The average
standard variable home loan rate has fallen by 1.62 percentage points from 7.31
per cent in November 2011 to 5.69 per cent in July 2013.
Variable
borrowers with a typical $300,000 home loan who keep their monthly repayments
at the November 2011 level of $2509 are adding more than $300 per month to
their mortgage. If borrowers continue this trend and add an extra $300 to a
$300,000 mortgage each month, they’d potentially save more than $151,000 and
shave nine years and five months off a 30-year home loan.
RateCity
spokesperson Michelle Hutchinson says the results of the study prove borrowers
should take advantage of the home loan market and accelerate their repayments.
“Even though the
cost of a mortgage rises when rates increase, it’s worth adding as much as you
possibly can to your mortgage, particularly when rates are low,” she says.
“Borrowers who
don’t have the extra money to add to their home loan while rates are low could
be in the wrong home loan, so it’s worth comparing deals now and considering
refinancing.
“By finding a
0.25 percentage point discount for a $300,000 home loan, it’s worth about $50
in savings per month. Add this to your mortgage and you could potentially save
about $36,000 and cut over two years off your loan.”
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