Refinancing home loans 'can effectively reduce rates'

Wednesday 25 May 2011

Article by Mozo

Aussies hoping to minimise the amount they pay in interest on their mortgage may be able to achieve this by going online to compare home loans and switching to one with a lower rate.

Refinancing home loans 'can effectively reduce rates'

Lisa Montgomery, chief executive of Resi Home Loans, told the Sydney Morning Herald that by doing this but continuing to pay back money at the previous level will reduce the amount spent in the long term.

She observed that fortnightly repayments at a lower rate could reduce the time spent paying back home loans by up to nine years.

The expert noted that while this may not result in a full one per cent reduction in interest rates, the overall effect is similar.

Ms Montgomery added that those choosing this strategy should also ensure they have paid off their credit cards and any other high-interest debts before hand.

The cash rate set by the Reserve Bank of Australia is currently at 4.75 per cent, but experts have forecast that this will rise in the near future.

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