How To Refinance, Save Money And Be Debt-Free Faster

WORDS: Jason Oxenbridge PHOTOGRAPHY Supplied

As the RBA takes a wait-and-see approach with the cash rate at 4.35 per cent, analysts are predicting it to stay that way in the short-term. So where does that leave mortgage holders? Ocean Road speaks to the Managing Director of Preston Point Capital, Shelley

McGinty, who offers some tips around refinancing, superannuation and how to pay off niggling loans a bit faster.                                                                                                                                                                                                                                                                                                                                                                                                                                 Shelley’s Top 10 tips to help you become debt-free sooner:

1. Make overpayments whenever possible. Even small additional amounts can significantly reduce your overall interest.
2. Switch to weekly or fortnightly payments instead of monthly. This clever trick results in extra payments each year.
3. Consider an offset account. Your savings can work to reduce the interest on your mortgage.
4. Utilise windfall money wisely. Put unexpected income like bonuses or inheritances towards your mortgage.
5. Refinance to a lower interest rate but maintain your current repayment amount.
6. Round up your payments. If you’re paying $1,200, bump it up to $1,300.
7. Cut unnecessary expenses and redirect that money to your mortgage.
8. Set up a side hustle and use the extra income solely for mortgage repayments.
9. Avoid taking payment holidays unless absolutely necessary.
10. Check if you can make lump sum payments without penalties.

By implementing these strategies, you’ll be amazed at how much faster you can pay off your mortgage. Remember, every little bit helps, and the sooner you start, the more you’ll save in the long run!

2. What advice do you have for refinancing and what’s the sentiment with lenders to do this?

Refinancing your home loan can be a very effective way to save money and improve your financial situation.It’s crucial to stay on top of the market and consider your options. Currently, many lenders are quite receptive to refinancing applications, as they’re keen to attract new customers and retain existing ones.

When contemplating refinancing, it’s absolutely essential to engage a mortgage broker. These professionals are worth their weight in gold, bringing a wealth of knowledge and industry connections to the table. They can access a wide range of lenders and products that you might not find on your own, potentially securing you a much better deal.

A skilled mortgage broker will analyse your current situation, understand your goals, and navigate the complex refinancing process on your behalf. They’ll compare rates, fees, and features across multiple lenders, saving you time and potentially thousands of dollars over the life of your loan.

Moreover, brokers are well-versed in lender policies and can advise you on which institutions are more likely to approve your application. This insider knowledge is invaluable, especially if you have a unique financial situation or are self-employed.

In today’s competitive market, having a mortgage broker in your corner can make all the difference. They’ll negotiate with lenders on your behalf, potentially securing better rates or additional features that you wouldn’t get by approaching lenders directly.

Don’t underestimate the power of professional guidance when it comes to such a significant financial decision. Engaging a mortgage broker could be the smartest move you make in your refinancing journey, potentially leading to substantial savings and a more suitable home loan for your needs.

3. Can people use their superannuation to pay down loans quicker? What should they be aware of?

Absolutely, using your superannuation to pay down loans quicker is a viable option for many Australians. This strategy can significantly reduce your overall debt and interest payments, potentially saving you thousands in the long run.

However, there are several critical factors to consider before tapping into your super:

• Firstly, you must meet specific conditions of release to access your super early. These typically include severe financial hardship or compassionate grounds. It’s crucial to check your eligibility with your super fund and the Australian Taxation Office.
• Secondly, remember that using your super now means less money for retirement later. Carefully weigh the immediate benefits against your future financial security.
• Thirdly, be aware of potential tax implications. Withdrawing super before retirement age may incur additional taxes, potentially reducing the amount available for loan repayment.
• Lastly, consider seeking professional financial advice. An expert can help you assess your individual circumstances and determine if using super to pay down loans is the best strategy for your long-term financial health.

In conclusion, while using super to pay down loans quicker can be beneficial, it’s a decision that requires careful consideration of your overall financial picture and future goals.

4. What about using superannuation to purchase property?

Utilising your superannuation to purchase property in Australia is a savvy investment strategy that’s gaining popularity. The key lies in establishing a Self-Managed Super Fund (SMSF).

Here’s how you can make it happen:

First, set up your SMSF. This involves creating a trust, appointing trustees, and registering with the Australian Taxation Office. Next, develop a comprehensive investment strategy that aligns with your fund’s objectives and members’ needs.

Once your SMSF is operational, you can use it to invest in residential or commercial property. However, there are strict rules to follow. The property must meet the ‘sole purpose test’, meaning it’s purely for providing retirement benefits to fund members. You can’t live in the property or rent it to related parties.

To finance the purchase, your SMSF can use its existing funds or borrow money through a limited recourse borrowing arrangement (LRBA). This structure protects your other super assets if the loan defaults.

Remember, managing an SMSF requires time, expertise, and ongoing compliance with Super laws. It’s a powerful wealth-building tool but seek professional advice to ensure you’re making informed decisions. With careful planning and execution, for many Australians, using their super to invest in property can be a savvy way to build wealth for retirement.

If you would like further information from an expert visit: www.prestonpointcapital.com.au