A little Twitter info on Home Loans

Home Loans

Low interest rates are an obvious reason to pay off more than you need to. If you are making overpayments on your home loan it really makes financial sense. But if you have other debts, and are lucky enough to have spare cash then pay off these and the most expensive ones first. That includes credit cards, personal loans and other purchases. Over paying onto a mortgage is the best thing that can save you thousands of dollars in the long run and chop years off your mortgage. So that when rates start to rise your interest repayments are not such a burden on your finances.
Many home loan deals allow customers to repay off as much as you like withouth penalty. There are other lenders out there whom have penalties and charges in their fine print to safe guard the value they can extract from the borrower. So don't do anything unless you have checked the fine print. If it is complicated to understand the terms & conditions of your loan then contact your financial lender and get them to confirm your home loan fee's and charges. When repaying your debts always start with the most expensive interest rate facility first. Ie credit card then personal followed by car loan, etc.

Home loan with an offset account - The big lenders still offer these and they are a good idea. The interest rates are often still the standard variable rate, but the offset account is a good way to reduce your interest while seeing how much you have saved. The amount you have in the offset account cancels the equivalent amount of money you owe on the homeloan in terms of interest charges. You must remember that unless the money has been actually repaid off your loan you still owe it. Many lenders offer an offset option as a place to keep extra repayments and excess cash so you are tempted to go and spend it, reducing all your savings efforts. If you use the offset account correctly it can be a real morale booster as you see how well you have done through saving that extra cash. When you reach a certain level transfer most of it onto your loan and save again.

Some lenders will keep tabs when you are well ahead in repayments. And it has been known for a big bank lender to contact their home loan customers to remind them that they are ahead in the repayments. Stating the extra thousands are available for redraw. This practise although it sounds like they are thinking of you, really is a clever way to line their own pockets with the extra interest they can then charge you again if you redraw the money out.

Homeloan with Direct Deposit for your earnings / income - Often sold as a solution where your money goes straight in to your loan and you can take money out for normal daily expenses. With claims that they save you greater interest, this can be over stated in some cases. In fact the reverse could be true as the interest rates charged is sometimes higher. Negating any theoretical benefits, costing you more in the long run. Your money may go straight in but you could be paying more interest. So borrower beware and do your research.

It is always important to check with your lender wether you can deduct any money your have overpayed from your balance. And what penalties or conditions form part of your loan. If you are likely to need some money for a extension, new kitchen, car or holiday then it's best to have a small pot of money stored away in a seperate account for a "rainy day" or an emergency.

Everyones financial situation is different. Never let yourself be convinced into over borrowing or accepting a greater loan than you actually need.
So speaking to a financial advisor is always recommended when making any decision.