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australia is weird

June 6th, 2019 at 07:14 pm

I was talking to a morg person the other day as when we buy a house we want it paid off in 5-8 years...ad I asked so if we pay extra payments on the morg and something happens does that mean we don't have to pay it for a few months since we would be ahead...they are like no...you still have to make the monthly payment...I thougt that was kinda rough they do everything to make things hard over here for us...but will sure be looking around and making sure we find everything out in the next year or so....apparently they do this with all loans but since we haven't had a loan in a few years we just don't really pay attention..guess we had better start doing some research so we can get the best deal for us.

4 Responses to “australia is weird”

  1. Carol Says:

    You can pay ahead in the US, but you still need to make each monthly payment. It just means you pay less in interest in the end.

  2. fireandi Says:

    I believe they do this not just ion Australia, but everywhere. It takes off payments at the end of the loan so you're making fewer payments overall, but not in-between. I would recommend having about 6 months of expenses (mortgage/rent/regular fixed and variable expenses) in a high-yield savings account for emergencies. After that, you can pay your mortgage down with extra payments. This way if something does happen that prevents you from being able to make payments, you will have the money in the EF and that will prevent your interest from skyrocketing and from your home being repossessed.

  3. rob62521 Says:

    I was going to comment the same thing Carol said. But, doing research is always a fine idea to make sure you know what you are signing.

  4. bluesfemme Says:

    Make sure you do your research. Certain products will allow you to act as if though you get to skip a payment.

    e.g., if you get a loan product with an offset account and want to pay twice your monthly payments each payments. Pay 1.5months to the actual loan and 0.5 month payment to the offset.
    The money in the offset is used to reduce the interest on the loan as if though you paid it directly. Every 3 months you could effectively not make a payment, but transfer a payment from the offset.

    Secondly, if you choose a product with free withdrawal of money paid in advance. For example, if you're $4,000 in advance, one month you can transfer directly from the loan to the savings acct, then use that to pay that month instead.

    I use a spreadsheet to see the savings. That shows how much interest i pay daily. It's shocking and you find yourself trying to save that money to throw at it Smile
    The biggest thing straight up is don't do monthly payments if you're paid fortnightly.
    Secondly work out which loan product features you will use - the simplier it is usually the cheaper the interest rates/fees, so don't pay for something you wont use.
    Lastly, understand that if you choose a fixed rate loan there are often strict limits on how much you can overpay, and an offset acct may not be able to be used, if the fixed term loan period is for more than a year,

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