Your home loan is a major financial commitment, and it’s important to find ways to save money where you can.
To help you save money, we’ve compiled a list of 7 top hacks that’ll put more money in your pocket so that you can own your home outright sooner.
While the prospect of having to refinance may seem like an inconvenience, it could help you save thousands on your mortgage.
Whether you’re comfortable with your current repayments or not, it’s wise to keep an eye on the market and observe what interest rates are being offered to new customers by different lenders.
Even a very small interest rate reduction can help you save plenty of money over time. As an extra way to save – keep your repayment amount the same even if you get a lower rate.
Don’t forget to look at more than just your interest rate too. Consider the following:
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When you make extra repayments, you’re paying off your loan sooner. And the faster you pay off your loan, the less you’ll have to pay in home loan interest.
The great thing about additional repayments is that you don’t have to be consistent with them. They’re simply something you can do, when you have the extra cash, to pay down your mortgage a little faster.
For example, if you receive a tax refund, monetary gift, work bonus, inheritance or some other unexpected sum of money, you could consider putting this towards your loan.
Remember to check whether your lender allows you to make extra repayments. While there are typically no restrictions for making additional repayments on a variable rate home loan, there may be for fixed rate borrowers.
Sometimes, extra repayments are simply not allowed if you have a fixed rate home loan. Other times, there may be limits in place. Check your lender’s policies and home loan terms and conditions before making extra repayments to avoid being charged break fees.
An offset account can be an easy way to reduce the interest you are charged on your home loan.
It operates like a transactional savings account that is linked to your home loan balance. Any money in this account offsets your loan balance, reducing the amount of interest you are charged.
For example, if you have a $300,000 home loan balance and $20,000 in your offset account, you’ll only get charged interest on $280,000.
With these interest savings, you might find yourself with more money to put towards your home loan through extra repayments. Alternatively, you could put the savings towards other investments or purchases.
Find out the difference between an offset account and redraw facility here.
Find out how much you could save each month.
While homeowners have been enjoying record low interest rates over the past couple of years, rates are likely to rise soon. This doesn’t necessarily mean that in a year you’ll be paying 10% home loan interest, but you can expect your mortgage repayments to increase somewhat.
One thing you can do to possibly minimise the impact of an interest rate hike is to switch to a fixed interest rate. There are still competitive fixed rates on offer and this could allow you to lock in a good deal for the next 1 to 5 years.
This means that when rates go up, you’ll still be charged a fixed interest rate for the remainder of your fixed term.
It’s worth speaking to a mortgage broker to find out if fixing your rate is a good move for you.
Most borrowers will have to pay some fees related to their home loan but it’s important to check that you’re not paying more than you need to.
Review your loan to make sure you’re not paying for features you aren’t using, like an offset account for example. Some home loan features are built into home loan packages and may attract monthly or annual fees but are only useful if you’re using them.
Plus, there are lenders offering zero-fee or low fee home loans, so it’s worthwhile being open minded about making a switch to avoid paying regular service fees.
Take the time to look over your finances – are there any changes you can make to your budget that would allow you to pay more towards your home loan?
Really consider your needs and whether you’re using what you’re paying for. For example, if you aren’t hitting the gym regularly, it may be time to reconsider your pricey membership.
There’s also a chance that your financial situation has changed since you started repaying your loan. Maybe you’ve received a pay rise, or your adult children have moved out of home. This can add more money in your pocket that you could put towards your loan.
Always be realistic about what you can afford to repay, but remember that increasing your repayments could trim years off your loan. Think about all the interest you won’t have to pay…
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If you’re currently making a single monthly mortgage repayment, you can actually pay down your loan faster by making fortnightly repayments.
By paying fortnightly, you’ll end up making an extra month’s repayment each year. So, you’ll save on interest because you’re paying off your loan faster. It’s not going to be a massive saving, but every bit adds up.
Get in touch with your lender to find out how you can increase your repayment frequency.
Want to get an expert’s opinion on your home loan? Book an appointment with a Lendi Home Loan Specialist today to find out more about your loan options.
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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.
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