The cost of living
The cost of living is high at present, one way to fee up some more cash and relieve cost of living pressures, would be to consider consolidating your debts.
Example below.
Existing Loans.
Home Loan $600,000.00, current interest rate 6.50%, repayments $4,052.00 per month (over 25year term).
Car Loan $30,000.00, current interest rate 8.00%, repayments $468.00 per month (over 7year term).
Credit Cards $10,000.00, current interest rate 20%, repayments $200.00 per month.
New Loan (refinance to another Bank for a lower rate and consolidate debt at the same time).
$640,000.00, interest rate 6.14%, repayments $3,895.00 per month (over a 30year term).
The above example would see you saving $825.00 per month and having the ease of one repayment.
Savings could be used to assist with cost of living and ideally some retained in the offset account or directed back into the loan to reduce your interest costs.
For example, you could retain $400.00 per month to assist with living expenses and direct $425.00 per month back into the loan, this would see you paying the loan off in just over 23 years and reducing your interest costs significantly (information below for reference).
Word of caution though, if you set up a new loan over a 30year term, the interest costs will be reset back to 30 years also.
Therefore, the above option would be beneficial if you can pay the loan out within the existing term, so you do not incur any additional interest costs.
This could be a good option to assist you with cashflow right now (keep loan repayments to a minimum) but look at maintaining the current level of repayments if interest rates decrease, so you are paying down the loan within the existing term.
FYI – I have some Banks on my panel that are offering Home Loan (variable, principal & interest) rates starting from 5.99% (this is a Basic Loan, does not come with an offset account, but does have redraw).
Please free to contact me if you would like to have a no obligation chat.
Written by
Gillian Burns
Mortgage Broker