Newspaper article Daily News (Warwick, Australia)

Taking Advantage of Interest

Newspaper article Daily News (Warwick, Australia)

Taking Advantage of Interest

Article excerpt

THE decision by the Reserve Bank of Australia (RBA) to reduce the cash rate to a record low 2% could present considerable opportunity for those with mortgage finance, and mortgage holders would be well advised to make the most of the rate while they can.

The record low rate from the Reserve Bank could be short lived dependent upon the impact it has upon the broader economy and for those with a vested interest now is the best time to take advantage of the rate while it lasts.

And there are several options for how to attempt to benefit.

Debt reduction

LOOK to reduce debt where possible in particularly non-tax-deductable debt.

Low rates are from cheap finance but they also provide an ideal opportunity to take advantage of reduced payments on loans, due to lower rates.

While you repayments on a mortgage are likely to drop, should you continue to make the same payments as previously these extra repayments could potentially save huge sums on the overall interest paid on a mortgagee as well as paying out the mortgage years earlier.

Debt consolidation

WHILE there may be record lows in home loan rates the same is not true of credit cards, personal loans, overdrafts and similar services. The rate gap between home loans and other facilities like credit cards has never been wider.

There is potential that people are paying 4.5 per cent on a home loan, against more then a 15 per cent plus on a credit card.

With record low rates it is ideal to replace expensive debt with cheap debt.

For those with home equity this is a smart proposition.

However, when consolidating in a home loan, the focus must the be placed on paying off this component of home loan debt as soon as possible, to prevent turning short-term debt into long-term debt.

Consider a lender that offers a fixed rate home loan with an offset account. …

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