February 05, 2024 by Mortgage Choice
After a year of increased living costs and rising interest rates, it’s no surprise that homeowners are trying to figure out how to save on their home loan and get it paid off faster. To help, we’ve gathered our top tips into one easy place, so you can get started on making a major dent in your loan in 2023.
Tip 1 | Switch to fortnightly repayments
You may have heard of this one before and it’s as simple as it gets. Setting up your repayments to be paid on a fortnightly basis instead of monthly, means that you will pay the equivalent of 13 months of repayments each year, instead of 12. It’s likely you won’t even notice and that simple but strategic difference will save you years (yes years!) off your loan term and thousands in interest.
Tip 2 | Make additional payments
If you really want to get your home loan paid off faster, there’s nothing more powerful than making additional payments. It sounds obvious, but we’re here to tell you just how effective it is. Paying any amount on top of your set repayment will reduce the loan principal, and therefore cut down the interest you’re charged.
There are two ways you can do this; you can increase your regular repayment or put lump sums you receive into paying your home loan. Just make sure to check the terms of your loan as some lenders may charge you for prepaying your loan or cap the number of additional payments you can make.
Tip 3 | Ask your current lender for a discount
Your lender wants to retain your business, but they’re not going to offer a lower rate - you have to ask. This is where a quality Mortgage Broker (like us) can really help you save money on your loan. Approaching your current lender for a discount is one of the first steps we take when reviewing your loan.
If they’re willing to discount your loan or offer a cashback for staying with them, it could save you money without the hassle of switching loan products. We believe that your lender should be working hard to keep you and this is a great way to make sure you’re getting a fair deal.
Tip 4 | Get your property revalued by the lender
In specific circumstances, one of the strategies we use to save our clients money on their loan is to get their property revalued. If your property is valued as being worth more now than when you bought it, the Loan-to-Value Ratio (LVR) on your loan decreases. This could mean an immediate reduction of your interest rate. However, this strategy is only effective if your property has actually increased in value, so it’s important to speak to us before approaching your lender.
Tip 5 | Use your Offset Account properly
Having an offset account as part of your home loan is such a great way to minimise the interest you pay. But it’s important to use your offset account strategically, so you can maximise how much you save.
Any money sitting in your offset account is deducted from the principal loan amount before the daily interest is calculated (thus ‘offsetting’ your interest). For example: if your loan amount is $500,000 and you have $20,000 in your offset account, the interest you owe is calculated on $480,000.
The borrowers who benefit the most from their offset are those who consistently deposit funds into the account. Offset accounts are very flexible and can be used like you would any transaction account, so try and keep it topped up as much as possible.
Tip 6 | Review and refinance your loan
Reviewing your home loan is something we recommend doing every two years. The market moves quickly and increasing interest rates mean that lenders are more competitive than ever for new business.
Our free Home Review service means we’ll compare your current loan with other loans available on the market to see if we can find you a better deal. We look for lower interest rates, better features or a great cashback offer. If you haven’t reviewed your loan recently, it could save you thousands and give you peace of mind that your loan is still competitive.
If we can find you something that saves you money in the long run, we will organise the refinance and manage the process for you.
I'm here to help
At Mortgage Choice, we treat every home loan like it’s our own and we hate seeing anyone pay more than they should. Let me put together a strategy for your home loan, so you can get it paid off and pave the way for financial independence.
Get in touch with me directly on 0493 747 272 or email andrew.jacobs@mortgagechoice.com.au.
