Home loans can be expensive. Even today with interest rates being very low, due to the high price of Australian housing, home loans are large and quite often barely affordable. The only financial relief that home buyers can count on is the potential of applying time proven strategies to reduce the cost of their home loan and debt
Refinance to a cheaper rate
Given the size of your home loan, even a small saving in the rate on interest can translate to thousands of dollars in savings over a year. If you are someone who loves to save money by shopping for bargains, it will take a lot of bargain shopping to save as much as you could by refinancing existing mortgage to a cheaper rate.
When comparing home loan rates make sure that you look at the comparison rate not just the advertised rate. Comparison interest rate includes all the other fees and charges that will be levied on your mortgage if you take up their deal. Therefore looking at the overall costs is important.
Using the offset account
Once you find the loan that works best for you and offers you the maximum available savings, do not stop there. How you use your home loan will also affect as to what the loan will cost you. The mortgage that you choose must also come with a 100% offset account. You can have all your income deposited directly into that account thereby reducing further the costs of your mortgage. A word of cautions - not all offset accounts are the same. We have spoken to home owners who asked their broker or lender for a loan with an offset account only to find out that it offered partial offset. The offset account must offer 100% offset to be most effective.
Move to fortnightly payments
If you are currently paying your home loan monthly, you may be surprised to know that by doing nothing more than moving to fortnightly payments, you can reduce the life of your home loan and therefore the overall costs incurred for the mortgage over its life-span. Moving to fortnightly payments is easy and does not require you to put any additional funds towards your mortgage.
Pay a little extra every fortnight
However if you want to do better still, then making some extra payments at least once a month will also reduce the costs of your home loan as well as the loan period. It may be only an extra $20 or $50, but over time this can exponentially offer huge savings.
Consolidate other debts
Finally if you are carrying outstanding debts on your credit card or other loans/debts, you can do no better than absorbing these into your mortgage in order to pay a home loan rate on these other more expensive loans. However to ensure that you do not keep paying interest on these debts for a period of 25 years, it is very important to maintain extra principal repayments so that you are paying the balances off after consolidation.
Refinance to a cheaper rate
Given the size of your home loan, even a small saving in the rate on interest can translate to thousands of dollars in savings over a year. If you are someone who loves to save money by shopping for bargains, it will take a lot of bargain shopping to save as much as you could by refinancing existing mortgage to a cheaper rate.
When comparing home loan rates make sure that you look at the comparison rate not just the advertised rate. Comparison interest rate includes all the other fees and charges that will be levied on your mortgage if you take up their deal. Therefore looking at the overall costs is important.
Using the offset account
Once you find the loan that works best for you and offers you the maximum available savings, do not stop there. How you use your home loan will also affect as to what the loan will cost you. The mortgage that you choose must also come with a 100% offset account. You can have all your income deposited directly into that account thereby reducing further the costs of your mortgage. A word of cautions - not all offset accounts are the same. We have spoken to home owners who asked their broker or lender for a loan with an offset account only to find out that it offered partial offset. The offset account must offer 100% offset to be most effective.
Move to fortnightly payments
If you are currently paying your home loan monthly, you may be surprised to know that by doing nothing more than moving to fortnightly payments, you can reduce the life of your home loan and therefore the overall costs incurred for the mortgage over its life-span. Moving to fortnightly payments is easy and does not require you to put any additional funds towards your mortgage.
Pay a little extra every fortnight
However if you want to do better still, then making some extra payments at least once a month will also reduce the costs of your home loan as well as the loan period. It may be only an extra $20 or $50, but over time this can exponentially offer huge savings.
Consolidate other debts
Finally if you are carrying outstanding debts on your credit card or other loans/debts, you can do no better than absorbing these into your mortgage in order to pay a home loan rate on these other more expensive loans. However to ensure that you do not keep paying interest on these debts for a period of 25 years, it is very important to maintain extra principal repayments so that you are paying the balances off after consolidation.