Taking out a home loan is a big financial commitment and you must do everything possible to get the best deal possible. Here are 11 top tips for saving on your home loan and assist you in reaching your financial goals sooner.
1.Shop Around
Don't just go with the first home loan you're offered. Compare interest rates and fees from various lenders to ensure you're getting the best deal. This is also the same once your loan has settled. A mortgage broker can assist this for by constantly monitoring the market and letting you know if any potential savings you may have.
2.Make Extra Repayments
The more you repay each month, the less interest you'll pay over the life of the loan. Even making small additional repayments can make a big difference. What’s more, most loans will have at least a re draw feature which means any amounts on your mortgage you have paid above the minimum required, can be withdrawn back out again if you need the money.
3.Fix Your Interest Rate
If interest rates are low, consider fixing your rate to protect yourself against future rises. Just be aware that break costs may be involved if you need to exit the loan early and there may be limits on how much additional repayments you can make. Fixed rates may also be higher than variable so it’s best to consult a mortgage broke who can run the numbers for you and advise which may be best for your financial situation.
4.Consider A Shorter Loan Term
A shorter loan term means higher monthly repayments but also less interest charged over the life of the loan. This can save you thousands of dollars in the long run. Quite often the difference between 5 years, may not be that much per week extra. You can also consider take the loan out on the maximum amount of time, but have your mortgage broker work out what payments you can setup to pay the loan down over a shorter period of years.
5.Make Lump Sum Payments
If you have spare cash, making lump sum payments towards your loan can help reduce the overall amount of interest you pay. As mentioned before with redraw, this means you can still access the funds later if needed. Ask your mortgage finance broker to include these features if you think these will help you in your home loan.
6.Refinance To A Lower Rate
If interest rates have dropped since you took out your loan, you may be able to refinance to a lower rate and save money or find a more competitive lender. There’s constant lender deals that a mortgage broker can help recommend and find for you, as they can typically search a huge amount of lenders easily, and access non-publicised rates.
7.Get An Offset Account
An offset account is linked to your home loan and can reduce the amount of interest you pay by offsetting the balance against your loan balance. This can be handy when it’s linked to a Visa Debit card, as you can have your pay go into this account, and then use it like an everyday savings account. This way any surplus funds will auto-negate interest without having to transfer money or make other arrangements.
8.Make Repayments Fortnightly
Instead of monthly, repayments can help you pay off your loan sooner and save on interest. Your mortgage loan broker can show you the cost repayment comparison on weekly vs monthly repayments. By simply switching to weekly this could potentially save a year or even more on your home loan mortgage.
9.Consider A Package Deal
Some lenders offer home loan packages that include features like offset accounts and free credit cards. These can be a great way to save money on your loan. There may be an annual fee, but the package deal will typically include a discount to make it worthwhile. Consult your home loan broker for what these packages may be and if they put you in an advantageous position.
10.Keep Your Loan Under 80% LVR
Lenders Mortgage Insurance (LMI) is charged on loans with an LVR over 80%, so keeping your loan under this threshold can help you avoid this cost. LMI protects the lender if you are unable to repay the loan and may need to be paid again if you refinance and still don’t have more than 20% deposit or equity. Consult your mortgage broker for some lenders that may offer LMI waivers for certain clients, or offer higher LVRs with no LMI.
11.Compare Home Loans Through a Mortgage Loan Broker
Use a home loan comparison broker to compare a range of different home loans from various lenders. This can help you find the best deal to suit your needs and also make you aware of discounts, cashbacks, and other benefits and incentives lenders may offer. Not all lenders offers and discounts can be found online so a broker can be your best way to find out the optimal finance lender for your financial situation.
Making small changes to how you manage your home loan can save you a lot of money over time. So, it's worth researching and shopping around to ensure you're getting the best deal possible, and to save even more time by using a mortgage broker for your home loan needs.
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