For instance; Loan features (bells & whistles) can be just as important, and if they are not relevant you may be paying for them in interest and fees.
Would-be borrowers might baulk at the suggestion of paying $400 annually for a package fee, when in fact that investment could save them money. Not only in interest rate discounts, but other features of the loan facility that can save additional interest when utilised properly.
Keeping this in mind, here are our top tips for saving money on your home loan:
An offset account is a transaction account that is linked to your home loan. The credit balance of your transaction account is offset against your outstanding loan balance, reducing the interest payable on that loan. An Offset account enables you to make the most of your income and other funds to reduce the interest payable on your home loan, thereby reducing your loan term.
At Mortgage Excellence, we advise that you get as much money in your Offset Account as you can and keep it there for as long as possible. This is because every dollar in your linked everyday banking account can save you interest, so it makes sense to keep your balance as high as you can.
Use your credit card for everyday purchases
Every dollar sitting in your linked everyday banking account matters, so taking advantage of interest-free days on your credit card can help you save money. Rather than spending money from your everyday account, use your credit card throughout the month for your purchases. This maximises the amount in your offset account and makes your money work harder.
You just need to ensure that when your credit card is due, use the money in your linked everyday banking account to pay the closing balance (in full) and avoid paying interest on your credit card. If you have a rewards credit card, you'll also be earning your rewards points.
Many Australian workers are paid fortnightly, yet most mortgage repayments are structured monthly. With 26 fortnights in a year compared to only 12 months, making fortnightly repayments is a sneaky way to pay extra off your mortgage without really noticing it.
At Mortgage Excellence, Greg will calculate with you and advise you on the best way to make your repayments.
Another fantastic cost-saving strategy is to increase your regular mortgage repayments. While it can be easier said than done for some households, making an effort to find some extra spare cash for your mortgage each month can reap big rewards. An extra $100 per month payment, for example, onto your already lower interest rate loan could add a big difference to interest payable over the term of the home loan.
At Mortgage Excellence, we will annually review your product to ensure it still suits your needs. You will be surprised at how much you could potentially save as an interest rate reduction of 0.4% on a $500,000 home loan can mean a saving of $2000 a year in interest. Not to mention the reduced pressure on monthly cash flow.
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