So you’re close to getting a home loan or you have already got one? Congratulations! Having a home or investment property is the ultimate dream for many individuals and families, however paying a loan off over 30 years can be a daunting task. At switchmyloan.com.au we are about helping you save money. We’ve created a list of 7 tips on how to save money on your home loan:
1. Choose fortnightly loan repayments instead of monthly. As interest is calculated daily and paid at the end of each month, choosing to pay off your loan can take away five years interest on a standard $300,000 home loan straight away – reducing the term from 30 years to 25 instantly.
2. Open an offset account. An offset account is a savings account that lets you save and at the same time helps to take away interest from your loan. For example, if you have a loan of $200,000 and a personal savings of $15,000 in an offset account, you would only be paying interest on $185,000 of the loan. This can help to take months, if not years off your loan.
3. Make extra repayments wherever possible. Got a little bit of extra cash lying around? Think about contributing more from your own pocket. A standard 6% home loan on a 30-year $300,000 mortage would cost $900 a fortnight in repayments. By merely contributing an extra $50 per fortnight you can save an extra 3 years in repayments and $35,000 in interest.
4. Before signing the loan documents try to pay 20% of the home loan deposit yourself. This not only means that you borrow less money on the home loan (80%) but also means that you don’t have to pay the bank’s nasty lender’s mortage insurance (LMI) which can cost thousands of dollars at the start of your home loan.
5. Try to avoid other credit in the early stage of your home loan. Whilst cars and shopping might seem a lot of fun, things can quickly get out of hand if you are repaying a home and aren’t careful of other expenditures. It is important to keep a good eye on your expenditures especially as car loan and credit card interest rates are much higher than a standard home loan interest rate. Keep a budget and stick to it. This will help make sure you don’t run into further debt.
6. Does your workplace offer salary sacrificing? Many employers in Australia allow you to sacrifice a portion of your pre-tax annual salary towards expenditures such as mortgage repayments and general living expenses. Having a portion of your salary deducted pre-tax means you save hundreds of dollars in tax and therefore helps to increase your fortnightly income. Check with your employer to see if they offer this service.
7. Be open to refinancing. At switchmyloan.com.au we are all about trying to help you get the better deal. In Australia we are lucky to have a competative market and different banks and institutions offer different deals with different fees and interest rates. By refinancing your home loan at a better interest rate you can save hundreds of dollars a year which ultimately over the term of the loan can help save you thousands.
Call 1300 307 155 and start saving today!
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