July 12, 2023 by Michael Bloomfield
For many households a home loan is the biggest financial commitment and, with an increasing cost of living and rising interest rates, looking for ways to save and pay off the loan more quickly has never been more important.
Here are my top tips for saving on your loan in 2024.
Tip 1: ask your current lender to give you the same rate they give to new customers
Sometimes called a loyalty tax, the common approach of lenders to offer a better interest rate to new customers than existing loyal, customers is unique to home loans. A call to your current lender letting them know that you will look at refinancing options if they don’t give you a better deal can be very effective.
A bit of upfront research so you can request the rate they are offering to new customers and provide examples of competitor offerings will make this conversation easier.
Tip 2: refinance to a better deal
If you are not happy with the result of tip 1 then refinancing may be the best option. At Mortgage Choice we regularly review your loan, including requesting a review from your current lender, and will let you know if you can save money by refinancing.
Tip 3: a valuation of your property can help you save
The loan to value ratio (loan amount as a proportion of the property value) is a key metric that lenders look at. Often lenders provide a better interest rate the lower the ratio is. This means that, if you have owned your property for a while, increasing property values and/or a reduced loan balance can mean you qualify for a better interest rate.
At Mortgage Choice we can help by checking property reports to get an idea of the current value of your property and ordering up-front valuations.
Tip 4: look at ways of paying your loan down more quickly to save on interest
Once you have made sure that you have a good deal on your current loan, putting in place strategies to pay the loan down sooner can save you money.
Making fortnightly rather than monthly payments can mean you pay the equivalent of 13 monthly payments rather than 12. This will reduce the loan balance that interest is charged on.
If you can afford to, making additional payments over and above the required payments can have the same effect. This can be done on a regular basis by nominating for an increased fortnightly or monthly payment or on an ad-hoc basis.
Finally, using an offset account properly can results in interest savings.
It is important to make sure that you have the right home loan with the appropriate features for the strategy you put in place to make savings. My team can help by talking through your objectives and identifying appropriate options from our panel of 25+ lenders.
If you would like to discuss this further contact me on 0412 973 386 | michael.bloomfield@mortgagechoice.com.au.
