8th June 2012
Five Tips:
What
to do when interest rates drop…
With another RBA
drop being
passed this week, it is a great opportunity to reassess your financial
situation.
1. Don’t reduce your payment: Most people would start
contemplating reducing their home loan repayments, when in fact, if you can afford to, you should keep the repayments as they
are or even look at increasing
them
slightly.
I
know
this must sound crazy, but when rates drop it means that continuing your normal repayments would mean that you are reducing your loan principal much faster and building
your equity.
2. Pay off other debts: Another option would be to reduce the home loan repayment, but use
the extra money to go towards paying
off
credit card or personal loan debt. These accounts are at a much higher rate and
you would benefit in the long
term.
3. Invest: When rates drop, you will
find that your capacity to borrow actually increases. This
means that you can possibly look at purchasing
an investment property. With the rental income and the reduced loan repayments, you may find that your weekly outlay is quite
manageable.
4. Consolidate your debts: Again, with the increased capacity to borrow, you may wish to
consider consolidating your current debts. By combining all
loans into one you will most likely reduce your current monthly outgoings. This is a great way to improve your cash flow, but you must remember
that your short term loans will now be repaid over a thirty year
term.
5. Contact YOUR Broker: Not all lenders are reducing their rates in alignment with the RBA, so
you must call
your
broker to find out what rate you will
now
be on and whether this would
be
the time to refinance your home loan.
With exit fees now abolished on variable loans it would make financial sense to review your situation.
The moral of the story is that you
shouldn’t jump into repayment reductions when in fact you could be better off by
keeping your payments the same!
DISCLAIMER: While we have taken all reasonable care in producing the information contained in
this article, we do not promise that
it
contains all the information you need to answer all your questions. This document
is for information
purposes only, and must not
be relied upon as
a substitute for professional
services or legal advice. Diversifi
Pty Ltd does
not guarantee the accuracy of information
provided by third parties
related to this
article.
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Director, Diversifi Pty Ltd
M: 0411 181 938
Award winning Diversifi was established by directors Tracey Gilbert, Rose De Rossi and Julie Ryburn.
Together they share more than 45 years finance experience. The team at Diversifi are an efficient, friendly, highly trained,
honest team of professional Finance Specialists who consistently deliver solutions to match their clients’ needs – for life!
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