RateCity has identified three types of savers that have a variable home loan. They are:
- the prudent saver
- the feeble saver
- the partial saver
The first we talk about is a prudent saver who makes the same higher repayments after interest rates drop. It is a wise strategy to be a prudent saver because when interest rates rise again the prudent saver will not be impacted by the higher repayments. This is because the prudent saver is already paying an even higher rate each month.
Also, by the time interest rates are on the rise once again, the prudent saver would have reduced their loan debt therefore making their repayments drop. If you take up the prudent saver strategy you can potentially save tens of thousands of dolalrs off your home loan and reduce the loan size by years, depending on the extra amount you add each month.
Use Australia’s leading home loan comparison service, RateCity.com.au, to compare variable rates. Also try our free Australian home loan calculator to see how much you will need to repay for different loan and term amounts.