How you can save $ 47,000 in interest and pay your home loan four years earlier by handing in takeaway coffee
- AMP Bank has modeled how a 400-year-old loan with a value of $ 400,000 can be repaid
- Placing an extra $ 50 a week in a mortgage would save $ 47,000 in interest
- To achieve this, two daily takeaway cappuccinos would be needed
- Reserve Bank of Australia lowered interest rates in June and July, making it easier
Borrowers with a typical home loan can pay off their mortgage four years earlier and save $ 47,000 if they stop buying takeaway coffee.
AMP estimates that AMP will request an additional $ 50 per week to pay a $ 400,000 debt.
With cappuccinos & lattes in paper cups that are usually sold for $ 3.50, two of those takeaway coffee cost $ 49 a week each day.
Home borrowers with a typical home loan can pay off their mortgage four years earlier and save $ 47,000 if they stop buying takeaway coffee (photo is a stock image of a coffee drinker)
With interest rates now at a low of one percent, home borrowers saw their monthly repayments fall by $ 60 in July, while the Reserve Bank of Australia lowered the spot rate by a quarter of a percentage point.
This followed another interest rate cut in June, which also reduced monthly repayments by a similar amount.
While home borrowers would have to pay an additional $ 200 per month on their mortgage to pay it off four years earlier – the RBA has done most of the work for them.
AMP's US CEO, Sally Bruce, said economic modeling showed that an average home loan provider with a $ 400,000 mortgage could save $ 46,992 in interest payments by using an extra $ 50 per week for their loan.
& # 39; Many people are unaware of the powerful impact of additional repayments on their mortgage & # 39 ;, she said.
& # 39; With recent cutbacks in variable mortgage rates, home loan customers have the choice to earn around whether they want to collect the interest rate cut or include the extra money, or part of it, back into their home loan. & # 39;
AMP Bank CEO Sally Bruce said economic modeling showed that an average home borrower with a $ 400,000 mortgage could save $ 46,992 in interest by using an extra $ 50 per week for their loan
Did your bank send the speed amount?
After the last interest rate cut, ANZ was the only major bank that fully passed on the interest rate cut of 25 basis points of the RBA, bringing the standard variable interest rate to 4.93 percent.
The Commonwealth Bank lowered its standard variable interest rate for principal and interest by 19 basis points to 4.93 percent.
National Australia Bank also reduced the equivalent credit rate by 19 basis points to 4.92 percent.
Westpac has meanwhile reduced its mortgage interest rate by 20 basis points to 4.98 percent
& # 39; It may be hard to believe, but delivering just a small extra $ 20 or $ 50 dollars a week can save you money over time. & # 39;
Her advice would go to someone with a $ 400,000 who will pay off a one-bedroom apartment, $ 500,000 in Sydney or an average-priced house in Brisbane.
The benefits would not be so dramatic for someone paying off a three-bedroom suburban home in Sydney.
Commit an extra $ 50 per week to a $ 1 million mortgage, the interest payments would decrease by $ 53,203, but it would only reduce the borrowing time by one year and nine months.
However, the major banks do not help borrowers to repay their loans earlier, with each bank not fully passing on an RBA interest rate cut in the last two months.
In July, ANZ was the only major bank to honor the 25 basis point interest rate cut of the RBA, with a standard floating rate of 4.93 percent.
However, in June it lowered its mortgage interest by only 18 basis points.
Her advice would go to someone with a $ 400,000 who will pay off a $ 500,000 apartment in Sydney or an average-priced house in Brisbane (photo is an auction in Sydney)
Last month, the Commonwealth Bank announced how it would lower interest rates by 25 basis points.
But in July it simplified its standard variable interest rate for principal and interest by a lesser 19 basis points to 4.93 percent.
Similarly with National Australia Bank, which in June achieved the virtue of aligning the RBA interest rate cut only in July to deliver a smaller 19 basis point, bringing the standard variable interest rate to 4.92 percent.
In June and July, Westpac refused to equal the interest rate reduction of the RBA percentage by one percentage point, whereby the cash flow was reduced by 20 basis points in both cases and the highest mortgage interest rate of 4.98 percent was achieved.
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