How Rivers home owners can save $5000 a year
WOULD you like to turn your home loan into a super stash of cash?
With a little legwork, thousands of Northern Rivers households could find more than $5000 in their pockets by year's end.
In our region, 8434 home owners have a mortgage, with the median monthly repayment as low as $1100 in Kyogle and as high as $1733 in Byron and Ballina according to 2016 Census data.
Finance experts say that, based on an average 30-year home loan of $371,100, households could save $5412 a year in repayments.
All you need to do is re-negotiate the terms of your loan with your current lender or, if they won't come to the party, simply jump ship for a credit provider offering better terms.
This could save you more than $162,000 over the life of your loan.
In Australia, there are many home loan comparison companies including Canstar, Mortgage Choice, Compare the Market, Infochoice and Lendi.
Tom Godfrey, spokesperson for national consumer advocacy organisation Choice, advised customers to avoid the "lazy tax".
"It's worth remembering banks don't reward loyalty," Mr Godfrey said.
"In fact, they often punish you with a lazy tax if you don't ask for a better deal or move your money.
"Getting your existing lender on the phone and pushing for a better deal costs you nothing and can really pay off."
Lendi co-founder David Hyman said a 50 per cent increase in traffic on his company's online comparison site showed Aussies were getting smarter about making their mortgages work for them rather than for the banks.
"It's all about making sure you get the best deal," Mr Hyman said, revealing it was vital to get a clear picture of what all the nation's banks and non-banks had on offer.
He said his second key piece of advice was encouraging people with interest-only loans to switch to "principal and interest" loans.
This would allow your repayments to be spread across the amount you borrowed and the interest you pay, he said.
"Since June 2017, principal and interest rates have been considerably lower than interest-only rates across the board," Mr Hyman said.
Other hot tips include consolidating all of your debts into your home loan, putting your salary into an offset account to reduce the amount of interest you pay each month; locking in part of your mortgage with a fixed rate and the remainder on a variable rate; and only refinance if you will be able to afford repayments if your interest rates increase 2-3 per cent.
Mortgage Choice CEO John Flavell said some lenders were offering "very sharp" fixed rate mortgages and these could serve some home owners well.
"While we are seeing fewer borrowers locking into fixed rate mortgages, it's important to note that some lenders are still offering very sharp rates in this area," he said.
"If borrowers feel more secure in a fixed rate product, they should consider travelling down this path."
Mr Godfrey issued a "word of warning" for people opting to use mortgage brokers.
"Be cautious about using a mortgage broker as they typically receive incentives to sign you on to larger loans and they don't have to find you the best loan, just one that isn't inappropriate," he said.
Why fixed interest loans are going out of favour
DEMAND for fixed interest rate home loans is falling.
Mortgage Choice's latest loan approval data shows just 22 per cent of all loans approved in Australia last month were fixed rate.
This means about 78 per cent of borrowers opted for variable interest loans and Mortgage Choice CEO John Flavell does not expect this trend to fade.
Queensland had the highest level of fixed rate demand, with this type of product accounting for 26 per cent of all loans written in January.
In NSW, fixed rate products accounted for 24.88 per cent of all loans written and the lowest demand was in Victoria where fixed rates covered 14 per cent of loans.
Mr Flavell said the drop in fixed rate demand was not "surprising" and it mirrored the Reserve Bank of Australia keeping the official cash rate on hold for the past 17 months.
"With all signs suggesting that that cash rate is likely to remain lower for longer, borrowers are feeling increasingly comfortable opting for a sharply priced variable rate home loan," he said.