New Year, New Mortgage Goals: Resolutions for Homeowners in 2025!
As the calendar flips to a new year, many Australian homeowners are setting their
sights on improving their mortgage situation in 2025. After several years of rapid house price growth and interest rate hikes, Aussies are eager to get a better handle on their home loans. If you are wondering how, you have come to the right place!
Let’s look at ways to take control back over your mortgage in 2025!
1. Refinance for a Better Deal
If you haven’t reviewed your loan in the last 24 months it is worth seeing your broker to complete a home loan health check. You may be eligible to receive a lower interest rate then what you’re currently paying. Mortgage interest rates have climbed significantly since May of 2022 following a series of Reserve Bank cash rate increases.
According to Canstar, the average home loan size in NSW is $779,239. This equates to a monthly mortgage repayment of $5,096 per month. (Based on an average variable rate of 6.83%). By refinancing to a lower rate, even by just a half of a percent, borrowers could save over $250 per month or over $3,000 per year.
Of course, it's important to weigh the costs of refinancing, such as application fees and discharge penalties, against the long-term savings so speak to your broker and understand whether refinancing may be right for you.
2. Increasing Mortgage Repayments
If paying off your home sooner is important to you, you may wish to make extra repayments in 2025. This is a wise goal if you are wanting to build equity or set yourself up for retirement. By switching your loan repayments to weekly and making just $50 more in weekly repayments, homeowners could shave 3 1/2 years off a 30-year loan and save over $149,100 in interest charges. (based on the average loan of $779,239 at the average rate of 6.83%) Even small boosts to regular repayments can have a big impact over time.
Of course, the ability to make extra repayments depends on individual financial circumstances. But for those who can swing it, accelerating mortgage payments is one of the best ways to build home equity and long-term wealth.
3. Switching to Offset or Redraw
If you are currently on a basic loan product you may want to consider if switching to an product that allows offset or redraw is going to be beneficial in 2025. These features allow borrowers to use their savings to reduce the amount of interest paid, while still maintaining access to those funds if needed.
4. Consolidating Debts
If you have accumulated some unwanted debts this year you may want to look at options of consolidating them into one easy repayment in the new year. This debt consolidation strategy can help simplify finances, increase cash flow and potentially reduce the overall interest paid. However, it's important to crunch the numbers with your broker carefully, as extending the repayment period on debts could end up costing more in the long run. Homeowners should also be cautious about using their home equity to consolidate their debts.
5. Exploring Fixed-Rate Options
Exploring fixed rate options may become more enticing in 2025 as banks start to reduce their longer-term fixed rates. You may be expecting a change to your financial situation in 2025 which may call for certainty of repayments. If this is the case, then a fixed rate may be an option for you. Be sure to take time to understand the limitations and fees associated with a fixed rate product.
Whatever your situation, I wish 2025 to be a wonderful and prosperous year for you and your family. Working with your broker and taking the time to understand these strategies is the first step to taking control back over your mortgage in 2025! If you would like to discuss further, then jump onto www.farnsworthfinancial.com.au to book a discovery appointment today.
