Aussies are 2.5 years ahead with their mortgage (and they’re cheering)
Homeowners are fast-tracking their mortgage repayments thanks to offset accounts and redraw facilities.
Australian homeowners should be chuffed with themselves as recent figures from the Australian Bureau of Statistics (ABS) show that on average, Aussies are two and a half years ahead on their mortgage.
Approximately 17% of the nation’s combined mortgage debt is sitting in home loan offset accounts and redraw facilities. This illustrates that Aussies are savvy when it comes to getting ahead on their mortgage repayments by leveraging money-saving features.
The Mortgage Choice 2016 Money Survey found that 38.8% of Aussies said they would invest their money in property, while a total of 56,562 home loans were approved over February 2015 which represents a 1.5% jump from the previous month.
Despite evidence to suggest that price growth is slowing in many of the capital cities, and the recent hype surrounding the Coalition's decision to leave negative gearing untouched, it appears that Aussies are feeling optimistic about the property market.
Both offset accounts and redraw facilities are useful home loan features that allow homeowners to reduce their interest payable over the life of the loan, and provide them with flexibility to redraw funds as they need them.
Back to topFor example, if you had a $300,000 home loan and you had $50,000 sitting in a 100% linked offset account, your interest, your interest would be calculated on a balance of $250,000 (instead of $300,000). At 5.5% interest over 30 years, this would translate to a $90,000 saving. It would also allow you to shrink your loan term by 7 years.
If you’re in the market for a home loan, try to find one that offers a 100% offset account to get the most out of this feature. Use a mortgage offset calculator to see how you could pocket.
On the other hand, a redraw facility allows you to withdraw any extra repayments you’ve made towards your loan. A home loan with a redraw facility gives you the flexibility and peace of mind in being able to access your funds as you need them. A redraw facility serves as a contingency buffer if an unexpected expense arises.
Unfortunately, some lenders may charge a fee to use a redraw facility so keep an eye out for home loan lenders that waive this fee.
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