Updated: Aug 4, 2023
Australians pocket $2,112 on average through their tax refund, according to research from ASIC’s MoneySmart, with only 16% of us missing out on this once-a-year windfall. Nearly one in three people use the refund to pay off bills, while one in five add it to their savings. Just nine per cent of people put the money towards their home loan.
While it’s not something that always comes to mind, putting your refund towards your home loan can end up saving you further down the track if you consider the figures. Say you’re two years into a 30-year loan, after borrowing $350,000 at an interest rate of 4.9%. Over the term of that loan, you’ll pay back the borrowed amount plus another $318,716. By putting the average tax refund of $2,112 towards that loan, you could save around $6,134 in interest payments and shave four months off your loan’s lifespan. Keep in mind some home loans don’t permit extra repayments and fees may apply.
Of course, it’s great to have money set aside for a rainy day. If you have an offset account or redraw facility you can still benefit from interest savings while having access to the funds. While it’s nice to treat yourself at the end of the financial year, putting just some of your refund towards your home loan can mean long-term savings.
Contact Alecto Finance for all your finance needs.
Are you expecting a tax refund this year?
If so, don't just blow it all on a holiday or shopping spree. Consider using some of your refund to pay down your home loan. This could save you thousands of dollars in interest payments over the long term.
At Alecto Finance, we can help you make the most of your tax refund. We'll work with you to create a financial plan that meets your individual needs. Contact us today to learn more.