08 Feb 5 Ways to Save Money on Your Home Loan
With speculation mounting that interest rates could be on the rise, it’s more important than ever for homebuyers and mortgage holders to make sure they’re getting the best deal they can on a home loan.
The most important thing you should be doing is speaking with a mortgage broker in Melbourne on a regular basis to make sure you have the right home loan product for your personal situation.
If you’ve already got a home loan, here are some things you should be looking at to try and save money on your repayments.
The most obvious way to save money on your regular mortgage repayments is to get a lower interest rate.
In the current environment, lenders are facing stiff competition and many are offering very appealing interest rates to attract new home loans. Your mortgage broker in Melbourne will be able to assess the best home loan products for you and identify the most competitive interest rate for your personal situation.
Typically, this will involve refinancing your current home loan which effectively means taking out a new loan. However, it is always worth approaching your current lender and seeing if they can offer you a better rate. Many lenders will prefer to try and keep a customer by offering a better deal than lose their business.
These days one of the most effective ways to save money is to use an offset account. An offset account effectively saves interest on any money that is sitting in the account. It’s attached to your home loan and instead of paying interest on your total outstanding mortgage, you can reduce that amount, by whatever funds are sitting in the offset account. This is a great way to have access to spare cash while also saving you money.
You can also take this one step further by buying essential items and putting your regular expenses on a credit card and then keeping those funds in your offset account. Just remember to pay down your credit card each month.
We all know the power of compound interest and how it can both help and hurt you. When it comes to mortgage repayments, even a small increase in the frequency of payments can make a big impact on the speed at which you pay down your loan. Which wil reduce how much interest you end up paying.
By changing your repayment schedule to fortnightly instead of monthly, you’re basically making 26 payments instead of 12 and that means, you’re paying off the debt faster and you’ll save tens of thousands of dollars in interest over the life of the loan.
Pay Off Chunks
The best way to reduce your overall repayments is to pay down the principal as fast as possible. While this might not be possible for everyone, however, if you do find yourself in a situation where you receive a work bonus or you come into some money through the sale of something like a car, it’s a good idea to pay that of the home loan.
At the very least, you should put those funds in your offset account as you’ll be reducing interest.
If you’ve got a number of debts that are attracting high levels of interest, such as unsecured car loans, personal loans or even credit cards, it is well worth looking at rolling all of those debts into your home loan.
Home loans typically attract a far lower level of interest than those other types of loans and by saving interest you can use those additional funds to help pay down your principal faster.