If you are a home owner with a mortgage or an investor holding debt within your portfolio, now is the time to review your lending arrangements. Seeking professional financial advice could help you uncover a more affordable, tailored lending solution designed to reduce interest paid and increase your disposable income. Here, we share 3 top tips for reviewing your lending arrangements.
1. Review your current interest rates
Whether you’re paying off your home loan or you have multiple investment loans (including those pertaining to property, stocks, shares or other assets), now is the time to ask your lender about the amount of interest you’re accruing on those loans.
Whilst you may closely monitor Reserve Bank of Australia (RBA) interest rate changes when they hit the headlines, be aware that some lenders don’t alter their interest rates in line with those RBA changes.
In the past twelve months, we have conducted a series of lending reviews on behalf of our clients. In some circumstances, we have identified borrowers paying between 0.5% and 1% higher interest rates than the lenders current variable rates. In these cases, finding an alternate lender offering lower interest rates, has the potential to annually save the borrower thousands of dollars.
2. Consider alternate loan structures
We can assist you to review your existing loan structure as it applies to your overarching financial position. It may be possible to tailor an alternate lending structure that is more compatible with your situation. For example, in some cases, an offset account may be a suitable vehicle for reducing your interest payable.
An offset account is a bank account that can be linked to your home or investment loan. The credit balance of your transaction account is offset daily against your outstanding loan balance, therefore reducing the interest payable on that loan.
3. Take action to increase your disposable income
Consider this: for an Australian with an average mortgage and income, mortgage repayments may make up to approximately 35-40% of their take home income. In an environment where wage growth and investment income is very low, saving on the amount of interest payable could lead to an increase in disposable income.
Additional cash flow and/or take home income could be utilised for additional debt repayment or put towards wealth accumulation strategies.
In short, don’t delay reviewing your existing loan structures because you could be foregoing potential savings.
For more information about tailored lending solutions for your home and other investments, please contact Wealth Fundamentals on (07) 3720 1299.
Matthew Lane is a financial adviser at Lane Moses Pty Ltd ABN 56 092 186 117 trading as Wealth Fundamentals. Wealth Fundamentals and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306.
The information (including taxation) contained within this document does not consider your personal circumstances and is of a general nature only - unless otherwise stated. You should not act on it without first obtaining professional advice specific to your circumstances.