Mortgage repayments have increased in recent years as record low interest rates have encouraged more borrowing. The Reserve Bank of Australia (RBA) slashed rates three times in 2019 from 1.50% per annum to just 0.75%.
But Australian household debt is climbing higher and is amongst the highest in the world relative to our incomes. Many of us may even be wondering whether its worth investing more in ASX shares or reducing those payments while we can.
So, if you've got a big home loan and need to reduce it quickly, here are a few general tips to get you started.
Talk to a qualified professional
It goes without saying that home loans are individual and mortgage repayments can be a huge burden. The first step in any major personal finance decision should be to consult with qualified professionals to find out the best option for you.
If your debt is sky high and you're looking for ways to out of financial trouble, free services such as those offered by the ACCC or National Debt Helpline can be a great place to start.
If you're not under financial strain and are simply looking for quick ways to reduce your debt, read on for a couple of easy tricks below.
Take advantage of low interest rates
Many in the market are tipping Aussie interest rates to fall even lower in 2020. The setback from the devastating bushfires is arguably putting the RBA under more pressure to help prop up the Australian economy.
With rates at record lows, now could be the ideal time to refinance your home loan and reduce your mortgage repayments. It's always best to work through a qualified professional to make the most of the opportunities on offer at the moment.
Use your ASX dividends for mortgage repayments
If you're anything like me, you might be wondering if its better to pay down your mortgage or invest on the ASX. While there's no simple solution, it can come down to your expected return from each option.
If you own a few high-yield ASX dividend shares such as National Australia Bank Ltd (ASX: NAB) or BHP Group Ltd (ASX: BHP), these could be your secret weapon right now. Instead of reinvesting in these ASX shares, you can use these dividends for your own mortgage repayments.
For instance, if you hold $50,000 worth of NAB shares that you don't want to sell, you could be getting a tidy 6.66% per annum dividend yield. That equates to $3,300 per year that could be reducing your mortgage repayments from today.
