The bank just cut our rate from 4.52 to 4.35 and gave us the option of lower payments or keeping the payments the same as we have now. We are comfortable with what we are paying so does it mean paying the loan off earlier?

Hi,

Yes, it will help repay your loan earlier and you will have a redraw.

thank you

Anton, Good morning. As mentioned already, by maintaining your existing instalment amount with a lower interest rate, you will steadily reduce the overall term of your loan and should have access to redraw the funds as your advance payments start to build up.

I do note, however that your new rate of 4.35% still seems quite high (particularly if this is for an Owner Occupied home).

If you have been in the home for a little time and built up some equity you could be looking at Owner Occupied rates of well below 4.00%. It could be worthwhile meeting with a Broker and performing a 'health check' on that existing loan.

I am quite close to yourself and would be happy to visit you (day/evening/weekend) to provide you with an overview of the current market and assess your best options.

Please take a look at my profile and give me a call should you wish to set up a no obligation / no cost chat.

Best Regards
Ken Olds
Customers First Mortgages & Insurance
1300 ASK KEN (275 536)

Hi neighbour. I also live in Beaumont Hills. I gather your loan is for your home, and whilst the fact that your bank has lowered your rate to 4.35%, you could do even better. Call them and say that there are a number of banks who are at sub 4% for home loans. Let them know you will refinance your home loan if they don't improve the rate even more. The average loan in our area is between $450k and $500k. An interest rate reduction of 0.50% would save you $500 per $100,000 of loan (say an average of $2,250 - $2,500) per year. By maintaining your current repayment level, you could cut many years off the term of your loan and own your home that much sooner. If your own bank won't help you, visit my office in Baulkham Hills.

The question is, can you earn an after tax return of more than 4.35% elsewhere with your surplus cash flow, taking into account the mortgage return is a risk free return.

Generally speaking though, even if you are willing to invest elsewhere for a greater return, you are still better off by directing all surplus cash towards your mortgage and reborrowing for investment purposes. This gives you the same result, but better tax efficiency.

But, as a simple answer, I'd say, yes, keep paying the higher repayment or better yet, increase it.

Hi Anton,
You have three great local brokers to choose from that have offered you some help. I would highly recommend you go and spend half an hour with one of them and you will almost certainly save a decent amount off that 4.35%
Best of luck
Scott