7 Ways to save money on your home loan
Your home loan repayments will probably be your biggest expense, so it makes sense to make sure your loan is working as hard as possible for you. We have listed below 7 simple steps to ensure you are paying no more on interest, fees and charges than is necessary.
1. Shop around for home loan rates
Home loan rates can change often, as rates increase and decrease by varying amount depending on the lender each time the Reserve Bank moves rates. Lenders will often also have special offers to get new business, so it’s worth keeping an eye out for these. We recommend that you review your home loan every 2-3 years to check that your rate and overall loan package are still the best fit for your circumstances.
2. Ask for a discount on your current loan rate
Before you do switch to a new lender, check that your lender can’t match the interest rate. They might surprise you and save you all the work of switching lenders; it certainly doesn’t hurt to ask, the worst they can say is no!
3. Check if your loan has any fees and charges
Check that your current loan is fee free, there is really no reason these days to be forking out hundreds of dollars a year in fees on top of the interest you already pay on your loan. When considering switching lenders, once again check the fine print for and hidden fees and charges. Most importantly check the comparison rate! If the comparison rate is higher than the actual interest rate on the loan, there are extra fees and charges.
4. Make as many extra repayments as you can
This is a given, but making as many extra repayments as you can will save you bucket loads in interest, and the earlier in the loan term you start, the better.
5. Consider if an offset account is necessary, or will a redraw facility do?
Loans with offset accounts usually have a higher interest rate. It’s really handy to have either an offset account or redraw facility attached to your loan, it means you can make extra repayments but still have the ability to access them if needed. Often loans with an offset account will have a higher interest rate, so watch out for loans with a free redraw facility. Most will now allow you to make redraws through your internet banking, which means you can redraw cash at an instants notice.
We use this feature on our loan very frequently! We treat our mortgage as a savings account, putting all our spare cash each fortnight in the mortgage. If we need to pull money out to pay a large bill or make a large purchase, we can do so instantly with no fees! This means our money is always working as hard as possible (it’s likely your home loan interest rate will be higher than any savings account rate currently available).
6. Make fortnightly repayments
Making your repayments fortnightly means you make an extra 2 years repayments each year when compared to repaying monthly, and you wont even notice the difference. Most lenders offer this option, so make sure you check it out when switching lenders.
7. Check your statements
Always check your loan statements as you would your bank account statements, if an error has been made on the lenders behalf you can then get on top of it quickly!