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Tips on How to Save on Your Home Loans


For most of us, buying a house is the biggest investment that we make. The difficult part is to choose the right services to get a home loan that doesn’t leave you financially crippled for the rest of your life. Financial experts warn that many Australians are overpaying for home loans, spending thousands more in interest than they should be paying. Overpaying for home mortgage can be detrimental to building wealth and has long term effects when you are trying to have financial stability. So here we are to help you save your money by giving you the correct guidance.

1) Cut your Payments in Half
This tried and tested strategy has been saving money for mortgage holders bucket loads of cash over the years. You simply take your monthly mortgage repayment – say $2,000 – and cut it in half ($1,000), and then pay this amount fortnightly instead of monthly. With monthly repayments of $2,000, you will pay $24,000 off your loan by year’s end. However if you pay fortnightly, by splitting the monthly repayment in half and making repayments of $1,000 every two weeks, you will pay $26,000, as there are 26 fortnights in a year.

2) Round up
If you’re like most people, a set amount is whisked out of your account each month for the mortgage. Say you’re the average Aussie with an average $369,600 home loan on an average 5 % interest rate (of course you should be paying less). Your required monthly repayments are $2161 but without too much discomfort to your brain or budget, you could round that up to $2200 … and save more than $11,000 and get out of debt nearly a year early.
Just be sure to re-set your direct debit so there’s never any active deliberation.
By the way, never adjust your mortgage repayments down. You’ve already got your head – and your hip pocket – around that level of repayment. If the minimum falls, you’re making a “bonus” overpayment that will save you significant money and time.

3) Rent out a room
Many homeowners are happy to share their home with non-family members, and will rent out rooms or a separate basement suite to long- and short-term renters. Before you decide to rent out part of your home, consider your lifestyle and comfort level, as well as the local laws that apply and any associated costs
If you are planning to rent out a space intermittently, make sure there are no restrictions on this, especially if you live in a condo or other community, and take into account the time and money required to manage the property. If you live in a city that has an upcoming high-profile event such as the Super Bowl, a large conference or festival, you may be able to head out of town and make enough for a mortgage payment or more in a week or less.

4) Use every dollar twice
A magic little Aussie invention called an offset account lets you use every dollar twice. A savings account that runs parallel to your mortgage, it nets off 100 per cent off any money you have in it against your home loan balance. So if you have a $100,000 mortgage and $5000 in an offset, you’ll pay interest only on $95,000.
You might have separate savings for a holiday, for your next car, for kids’ school fees … you should instead be putting every single dollar – which you get to keep – in an offset account. That way you get to use it for its intended purpose and to save dramatic interest.
Let’s assume you have the average mortgage and an average of $10,000 sitting in your offset. You’ll save more than $22,000 in interest, and almost a year and a half.
You could also take this to a higher level by getting your salary paid in and using a credit card for all your expenses, shifting the money out only when your credit card bill is due each month. At which point more salary should go in your account.

5) Get a health check
Review your loan to decide if you need all the features you may be paying a premium for. Compare it against others by getting a home loan health check from an experienced mortgage broker, to see if you can save money by negotiating a better deal with your current lender or by switching lenders.

6) Make it race
Australian interest rates are at all-time lows so, now, you have once-in-a-lifetime chance to repay your debt cheaper and faster than ever before. Do so at an average 7 % rate and the total cost of your average house will be $784,000. Do so at 5 % and that falls by about $200,000 to $585,000. And you save even more when you repay extra … even if you trick yourself into it!
Choosing the right home loan is not only about getting the lowest the rate of interest but also getting the best loan features. Once you know how much you can borrow, you may select the home loan that gives you the best deal, which could give you competitive interest rate as well as the right loan features. When you look for mortgages you not only look at lower interest rate but also at monthly repayments and loan period. So I hope that these tips may help you to make the right decision regarding your home loan.

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