Mortgage loans: How to use the low interest rate
The low interest rate makes mortgage loans very cheap right now. Can you reschedule loans and save interest or lower your performance? How to use the low interest rate on mortgage loans.
Interest rates on financial markets are constantly changing, currently the short-term interest rate is negative, and the long-term interest rate is record low. Although it has been so long, it is in many ways the year of the records when it comes to interest rates.
Opportunities to take advantage of the low interest rates on mortgage loans
Long-term loans are very cheap right now because of the low interest rates and this gives you many options that play positively with the rest of your finances. It is a new situation that makes the good Latin five years ago not necessarily right today. In the following you will find two examples of how you can benefit from the new opportunities.
If you need to place a portion of the assets in your pension, free funds or in your company, you get a very low interest rate on a deposit account or in short bonds. On the other hand, it is interesting for you to utilize the low short-term interest rate on the loan market if you have the opportunity. However, you do not necessarily have to have cash savings in order to make use of the following options.
Deposit more for pension
Use the low mortgage rate to pay off more quickly on your loans or reduce the loan service and save a little tax by paying more on the pension scheme. Both provide space for larger payments for pension savings.
However, nothing is free in the financial markets, so it is important to do it right. It is only an advantage to increase your pension savings if you pay top tax now and do not do so when your pension is paid. In addition, you must have profits in the economy for the extra payments. You may well draw on the property value of real estate, but it must not be at the expense of your short-term reserves. The macroeconomic conditions can change rapidly, while pension funds are tied up until you retire.
There is actually talk of leverage of your finances when you take out loans and pay extra for pension, but under the given circumstances it is appropriate. The very low loan rate makes it very advantageous to take advantage of these opportunities. And the younger you are, the better the chances of increasing your wealth.
Repay the debt faster
If you prefer to pay off your debts faster because you do not have reserves or top tax enough, then you can convert a long-term fixed-rate loan into one or more loans with shorter maturities. If you can pay your loan with long maturity back in 5-10 years instead of 20 or 30 years, then you can lower the interest rate to approx. 0.5%. See, for example, courses and interest rates at BRF.
It requires you to save more now, but on the other hand you get a much higher interest rate effect on your finances for the rest of your life. It’s one of the benefits of a low mortgage rate, use it wisely.