Adrian Sheahan came across an offer he couldn’t refuse – one that would help him pay off his mortgage in record time.
Interest rates are historically low, but Mr Sheahan found a loan with an interest rate of just two per cent, knocking at least 15 years off his mortgage.
“It enables me to pay my home loan off quicker, so every dollar I put in is going more towards reducing the debt, rather than paying interest on the home loan,” he told 7 News.
Mr Sheahan’s interest loan is called a loan reducer or pivot loan, where interest rates on mortgages can be as little as two per cent.
Property expert Chris Gray said this had to be the only two per cent home loan around.
“Most interest rates on home loans are about three-and-a-half to four-and-a-half per cent, maybe even higher,” he said.
Despite it sounding too good to be true, this low interest loan is not available to everybody and there is a catch.
“This is around for anyone who has a home loan and they’ve got an investment loan at the same time,” Mr Gray said.
It works by shifting interest from someone’s home loan, which is not tax deductible, then adding it to their investment loan, which transforms it into a fully tax deductible loss.
For Mr Sheahan, that meant shifting interest across to his investment loan.
The Australian Taxation Office gave this little-known mortgage product the green light in 2015, and finance experts say for tens of thousands of investors trying to pay off a big home loan, it’s a win-win.
“The big benefit for the person with the home loan is that if the interest rate’s lower, you can pay more of it off,” Peter Switzer, of Switzer home loans, said.
For Mr Sheahan, the low interest rate will take about 15 years or more off his mortgage.
For more information on the two per cent home loan reducer loan, see the websites below: