What influences the interest you pay on your home loan?
There are several factors that can impact your daily interest charges. Some of these include:
The interest rate set by RedZed
Your accrued daily loan balance
The frequency of your repayments
Loan features like redraw facilities and offset sub-accounts
How much interest will I pay each month?
Your interest charges are calculated every day and added to your loan balance once a month. Here’s how daily interest is calculated:
- In a 31-day month (e.g., January) the monthly interest is $3,397.29.
- In a 28-day month (e.g., February) the monthly interest is $3,068.52.
How can offset and redraw help?
Offset sub-accounts
Are like a redraw account that’s linked to your loan. Making additional payments which you transfer to your offset sub-account reduces the balance on which interest is calculated.
Making extra payments
Making extra payments on your loan helps reduce both your loan balance and the interest you pay. You can still redraw these extra payments if needed, giving you greater flexibility with your finances.
What happens if I increase my repayments?
Increasing your repayments—whether by making ad-hoc payments or paying more than the minimum (e.g., minimum + $200), can have a significant impact on your loan.
By paying extra, you reduce your loan balance faster, which lowers the amount of interest charged over time.
This can shorten your loan term and save you money in the long run. Plus, it helps you build equity in your property more quickly.
The lower your loan balance, the less interest you’ll be charged each day.
Making extra payments (in lump sums or on a regular basis) can help reduce your loan balance, which in turn reduces the overall interest you are charged over the life of your loan.
Ready to discover ways to lower your daily interest charges?
Contact our Client Services team on 1300 722 462 or email us at clientservices@redzed.com. We are here to help you understand your options.
Don’t stop now, there’s more!
You’ve started strong, keep the momentum going with more handy tips and insights below.
What is an interest-only loan?
With an interest-only loan, you can nominate a set period where you only pay the interest on the amount you’ve borrowed.
What is a redraw facility?
A redraw facility is a feature available with certain loan products that houses any additional repayments you make on your loan, above the minimum required amount.
What is an offset sub-account?
An offset sub-account is a separate account linked to your home loan, where extra repayments help reduce the interest you pay by offsetting your loan balance.