How this Federal Budget tax cut could shave $10,000 off your home loan
Much has been made of hamburgers and milkshakes in the lead up to the 2018 Federal Budget, but following its release by Treasurer Scott Morrison last night, did the budget end up delivering any mouth-watering morsels for Australian property owners?
The answer is not really. While property may have been front and centre of the previous years’ budget in the form of the First Home Super Savers Scheme, it was overshadowed this year by income tax cuts and infrastructure spending.
However, Mozo’s data whizzes have crunched the numbers and revealed some positive news for Australian mortgage holders based on the announcement of the so-called $10 a week ‘hamburger and milkshake’ tax cut.
The tax cut, which actually comes in the form of a change to the low-income tax offset (LITO), will see Australians earning between $37,000 and $125,000 eligible for a rebate of up to a maximum $530 (or the equivalent of just over $10 a week) come tax time.
The proposed changes, which are planned to come into effect from July 2019, will still need to pass the parliament though before being enacted.
How will this help owners slash their home loans?
You may be wondering just how these proposed tax changes could help you save thousands of dollars off your home loan, but that’s where the Mozo data whizzes come in.
Let’s say you have a $350,000 home loan, which you’re paying off with monthly repayments, over a 25 year period, on the average 4.35% interest rate currently in the Mozo database.
If you were to put the maximum proposed rebate (the equivalent of $10 a week, or $43 a month) into your home loan instead of spending it on that weekly burger and milkshake, you’d end up paying off your home loan 11 months ahead of schedule - saving a whopping $9,915 in the process.
The impact is even more substantial with two income earners, given that an extra contribution of roughly $80 a month would shave 1 year and 10 months off your home loan and save you nearly $19,000 in interest.
According to Mozo Director Kirsty Lamont, while the proposed changes could provide some vital relief to Australian property owners who use their rebates on their home loans, there are always plenty of options available to save even more.
“Making extra repayments is a great way to cut down your home loan, but don’t get complacent and miss the opportunity to pay it off even faster. By reviewing your current rate and comparing it to other offers, you could find that you’re missing out on an even better value deal,” she said.
Want to do more to pay off your home loan faster? One of the easiest places to start is by comparing your existing rate against a range of great low rate home loan deals over at the Mozo home loan comparison hub. You may just find that it’s time for a change.
Otherwise check out these other top home loan tips below.
3 handy tips to help you pay off your home loan early
- Make the most of free extra repayments: If your home loan provider provides one, making use of a free extra repayments facility could seriously reduce both the amount of interest you pay on your loan and the time it takes to pay it off. Many home loan offers also provide a redraw facility as well, just incase you do need to dip in.
- Switch to fortnightly repayments: It may seem like a simple trick, but switching from making 12 monthly repayments a year to 26 fortnightly payments means that you’re effectively paying off an extra month a year!
- Take advantage of an offset account: While your lender may charge a premium for a loan with an offset account, using one may well prove worthwhile down the line if you’re able to significantly reduce the amount of money you’re actually paying interest on over the life of the loan. For a full explanation on how they work, check out our offset account guide today.