Steps on how to save on your mortgage
Need to save your home loan funds? Being mortgage-savvy could possibly save you a considerable amount over your loan life.
Buying a house is one of the most thrilling – and expensive – things you 're ever likely to do. But when it comes to your repayments, set the feeling aside, because we're about to tell you how you might save some significant cash on your home loan.
Your mortgage, given the cost, is an commitment to your future. Nonetheless, there's no point in shelling out more of your hard-earned money than you need-a few basic savings techniques might save you thousands of dollars.
To help you save money on a home loan, here are four basic steps:
Securing lower rates
Financial institutions want your business and some are willing to cut the rate to attract you. Consumers are more motivated than ever with a range of online pricing resources such as the home loans review platform (you can review our regular home loan rates).
Do you want any tips on securing a lower interest rate? We got 'em!
Do a little research, find a product that has the specifications you need at an reasonable rate and contact your mortgage broker and see if they can suit that. How much could you save possibly? Only a 0.4% rate cut – from 4.45% to 4.05%– could theoretically save you the following:
Keep your repayments the same
Trying to negotiate a lower rate and keeping your monthly repayments at their preceding amount will save you even more. Continuing with the same example, securing a rate reduction of 0.4% but still holding repayments at $1,511 per month will look as:
Loan amount $300,000
Term of loan 30 years
Comparison rate* 4.05% p.a.
Monthly repayment^ $1,511/month
Total repayment^ $497,332
Total interest paid $197,332
to original example $46,684
The added advantage to this approach is that it will actually pay off your mortgage much sooner!
Many Australian employees are paid fortnightly, but the majority of monthly mortgage repayments are scheduled. So with 26 fortnights in a year compared to just 12 months, paying fortnightly is a perfect way to pay more out of your mortgage without even knowing it, as you are making an additional repayment every year.
Lowering your monthly interest and paying that balance fortnightly, along with the 4.05 percent reduced comparative rate, will make the difference as follows:
Increasing your repayments regularly
Another great cost-saving technique is to increase your daily mortgage repayments or make extra repayments in addition to your normal repays. While it might be easier said than done for some families, every month making an effort to find some extra cash spare for your mortgage will yield big rewards.
For example, an additional $100 per month payment, in addition to the reduced 4.05% comparison rate
In doing these four things in the illustrations above, the mortgage could be paid off over 8 years and a half earlier with approximately $95,000 in savings! And choose the best rate for you here.