Dollar Saver tip #40
The average expected tax refund this year is $2,900 and, according to Finder research, for 1 in 8 Australians, that refund is 'critical'.
While the cost of living is taking a toll on millions of Australians, rising interest rates are also adding pressure by way of increasing mortgage repayments.
But if you're in the financial position where you can put your tax return towards your mortgage as an extra repayment, you could shorten your loan and save thousands.
That's assuming an average expected tax refund of $2,900 gets paid towards a mortgage size of $587,517, which has been paid over 5 years with an interest rate of 6.16%.
Did you know?
According to Finder research, 15% of Australians are planning to use their tax refund on household bills, 5% are planning to put it towards their home loan and 36% will put it into savings.
In bringing down your principal by $2,900, you'd shave 3 years off your loan and save $10,478 over the life of your loan. If you're on a 30 year loan term that's $419 a year saved over the next 25 years.
It's worth pointing out that this calculation doesn't take fluctuating interest rates or fees into account. But, paying the extra cash towards your principal will always still end up saving you money in the long run.
And, if you can, making repeated extra repayments will save you even more money. You can use Finder's extra repayment calculator to see how much you could save if you pay more towards your loan.