Early repayments advised when borrowing against home loans

Thursday 29 October 2009

Article by Mozo

When considering borrowing against home loans, mortgage customers should be sure to increase repayments.

This is the advice offered by Gillian Bullock, writing in the Australian.

While redraw facilities could be a more flexible option than taking out a personal loan, there is a danger of paying more in the long run, she warned.

People may wish to take out money for a holiday, for example, but this can have certain pitfalls.

Ms Bullock stated: "The risk here, however, is that you may turn what should be a short-term debt into a long-term debt that you will still be paying long after the memories of that trip have disappeared."

In light of this, she suggested boosting home loan repayments to ensure the debt is paid off within a shorter period.

Ms Bullock advised against paying off the money over the remaining years of the mortgage, since this would significantly increase the amount of interest owed.

This advice comes as Australian banks said this week that they would hike the rates on some fixed-rate products, which may be bad news for those looking for low interest home loans.

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