The 11/01/2019
The purchase of a home is one of the most important financial moves that a person can make. You will probably repay the loan balance for decades, and the total cost may seem daunting at first.
Fortunately, there are many ways to save on your home loan, both when you apply for it and when you pay it. Take a look at our top five tips for saving on your home loan.
1. Repay the loan quickly
There are several viable tips for saving money on your home loan, but the best we can give homeowners is to pay off the balance of your loan as soon as possible.
Arrange repayments of your loan as principal and interest, so that you will repay the principal from the beginning. The longer your loan lasts, the more interest you will pay over time. Your goal is to reduce capital as much as possible in order to save interest.
The extra money you pay on your mortgage will reduce the interest you pay in the short and long term. This will result in thousands, if not tens of thousands, of savings on interest payments.
Making additional repayments may seem difficult, but some strategies will help you reach your goal. First, check the terms of the loan and see if there is a ceiling for additional repayments. This hurdle will only apply to fixed rate mortgages during the specified term.
A strategy to repay your loan earlier is simply to pay every two weeks rather than every month. The reason for this strategy is that there are 26 fortnights, but 12 months a year.
Every year, you will pay once every two weeks. This can be a good method for those on a tight budget.
Be aware that early repayment of your loan may result in fees. Check the terms and conditions of your loan to see if they apply.
2. Negotiating
Negotiating with a lender before applying for a loan is one of the best ways to save money. For this you need to research and understand the different rates, features and benefits offered by each lender.
Compare home loans to get an idea of ​​what some popular lenders are offering, then talk to a mortgage broker about the loan products that interest you. A mortgage broker can negotiate with lenders on your behalf in order to set a good rate and attractive features for your loan.
3. Take advantage of counterpart accounts
Counterparty accounts are a common feature these days, with most lenders offering them as an option with certain loans.
An offset account is a transaction account linked to your loan. The balance of the clearing account is then used to "offset" the principal, resulting in a reduction in interest expense. Most cleared accounts offer 100% compensation, so we'll use that as an example.
If you have a loan of $ 350,000 with $ 50,000 in a matching account, interest of $ 300,000 will be charged. If you manage to keep a substantial amount in your matching account, you will save thousands of dollars in interest payments.
However, note that some matching accounts have account maintenance fees, so weigh yourself by comparing costs with benefits before making a decision.
4. Using loans
Loan forms are not suitable for everyone, but they can be a way to save extra money when you first apply for a home loan.
Lenders often offer packages including discounted rates, discounted insurance, credit cards, access to a financial planner, and so on. You will pay a single annual fee and will be able to borrow at a slightly reduced rate.
Again, it may not make sense if you do not need the added features. Nevertheless, the packages can be a good deal for many borrowers, and you should consider this during the application.
5. Review Your Mortgage Regularly
This is especially important for borrowers who had a credit below par or a small deposit when they applied for their home loan. After having your loan for a while and accumulating a good credit history, you may find that you are entitled to a better rate from another lender.
Some lenders offer lower rates than others and you may find that your current rate is above market standards. The difference may seem minimal at first, but can reach thousands of dollars over time.
Changing the loan does not have to be a problem, especially if you have a broker on your side to help you in the process. You may want to even refinance your loan with the same lender, depending on their loan products.
I hope these tips have helped you better understand how you can save on your home loan. Ready to save on your home loan? Visit ratecomparison.com.au to compare the options today.
Disclaimer: The views expressed by the contributors do not necessarily reflect the opinion of Your Investment Property.
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