by Scott Pape - November 2nd 2011
I KNOW $50 a month doesn’t sound like much, especially if you have a huge home loan.
But if you let your mortgage eat the rate cut, instead of putting it back in your pocket, that $50 will wipe as much as $41,000 off the average mortgage.
(That’s also why it’s important to tart yourself around to the banks every few years).
Given the global economy is as patchy as Shane Warne’s spray-tan, your mortgage is the smartest place to park your dough.
Research by ANZ found the best investment over the past 24 years was owning a home (12 per cent), beating investment properties (9.6 per cent and shares (8.9 per cent).
Right now I’m keeping my mortgage variable, even though the banks are offering cheaper fixed rates. Why? Because if I fix and rates drop I’ll be slugged with a break fee.
Depending on what happens in Europe, we could see more rate cuts and that’s when I’ll be looking to lock in – but in the meantime I’m aggressively paying off my loan (even more than $50 a month).
Tread Your Own Path!
Use our Extra Repayment Calculator to see what an extra $50 a month could do to your mortgage.
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6 comments
Great, yet again those of us too sensible not to hoc ourselves into enormous debt will have to pay for the mortgage belt that did.
They’ll do whatever they can to prop up ridiculous house prices so now the inevitable correction will be even worse, but hey that will be gen x and y’s problem.
Hi Scott
I understand the RBA lowering the cash rate is a great opportunity for people with debts.
But what about those who aren’t?
I noticed Ubank have lowered the Usaver interest rate proportionally (as you would expect.) Other banks soon to follow.
I guess I am interested in knowing what opportunity could arise for someone with a positive cash-flow.
Thanks.
Ubank lowered the rate 40 basis points which is even more than reserve bank rate cut. All this came the day after I opened the account and started to transfer $35k (my ever growing house deposit) in there.
Mick if its still over 3 years until you buy, open a first home saver account. I just got a free $150 for my first financial year input of 1k plus the 5% interest from the standard account interest.. Next year will be a free $935 for putting in 5.5k.
Thanks Jen, that’s good advice but I only discovered first home saver account a few months ago (when I discovered the joy of the barefoot) and I’m now only about 12 months off buying. With nearly $40k saved to date the FHS account would have earned me thousands extra if only the Gov’t did a better job of advertising it.
hi great idea,i am lucky as i have paid off my home i am now trying to start a not for profit land bank to lease to those not able to afford to own there own home, the lease would be for life pos at $50 pw indexed so they could build a home.is there anyone willing to come on board to get this thing going what about u scott thanks peter