As most of you know, I’ve always had a love of fast, high performance cars. In fact I’m not afraid to admit that in my earlier days, I owned and drove a number of hotted up, turbo charged vehicles. Why? Because I had a need for speed and my turbo charged cars gave me a way to get where I wanted to go, faster and with a whole lot more fun along the way.
So when my clients ask me how they can improve their financial situation, I always look for ways to turbo charge and speed up their results… and in the current economic environment of record low interest rates, there’s never been a better time to do it.
However, even though Australian borrowers have benefited from the run of unprecedentedly low official interest rates for quite some time, many are unaware there are a number of simple ways to maximise the current positive rate environment and turbo-charge financial results into the future. This is because when it comes to loans and finances the elements of principle amount loaned, interest rate applied, period of loan and frequency and size of repayments are the all-important variables which act as multipliers to give you exponential results across the life of your loan.
Therefore to take advantage of these exceptional, low interest rate conditions, use the steps below to turbo charge your financial outcomes…
4 Ways to Use Current Low Interest Rates to Turbo Charge Your Finances…
Increase Your Repayments
With low interest rates, comes correspondingly low monthly repayments. Therefore where ever pssible, I recommend you actually increase the amount you repay on a monthly basis to a level you are comfortable with, and if rates do drop, continue to maintain your original higher repayment levels. In this way you will be working with the law of compounding interest and paying more now to significantly reduce your total amount paid over the life of the mortgage. For example, if you are paying a mortgage of $350,000 with a 4.09% interest rate over 30 years at monthly repayments of $1690, by increasing your payments by just $50 per month, you could save up to $16,157 in interest and pay off your loan in 28 years and 6 months.
Make Extra Repayments
By simply increasing the frequency of your repayments over a calendar year you will effectively be making extra payments against your mortgage and bringing down your loan amount more quickly. Meaning you will be able to pay off your loan years sooner than your scheduled mortgage completion date. For example, using the same loan above of $350,000, by switching to fortnightly payments and still paying the exact same amount over the year you could save $41,095 in interest and pay off your loan in 25 years and 11 months.
Reduce the Total Interest Paid Over Time
By implementing the first two steps above you will begin to benefit from the multiplier effects of increased payment amounts and greater frequency on your loan. This means that you will not only bring down your debt and build up the equity in your property faster, you will also be decreasing the total amount of interest you pay over the life of the loan. Which translates into less of your money going to your lender in interest and more of it staying in your pocket. For example, using the same loan above of $350,000, by making fortnightly deposits plus the extra amount of $50 on your repayments, you could save up to $64,182 in interest and pay off your loan in 23 years and 6 months.
Invest or Build Wealth Into the Future
Once you have begun working with the three preceding steps, over time you will ultimately benefit from the impacts of greatly reducing your mortgage and owning your home sooner. This translates into more options for your financial future and sets you up to take advantage of opportunities to invest and build wealth. Just imagine what you could create once you no longer have a mortgage on your home and can redirect your cash flow towards passive income generating investments?
If you would like to know how you could turbo charge your finances and benefit from the current market, why not come in and sit down with a qualified mortgage broker to assess your specific situation?
See you in the fast lane, Champions.