Saving money on your mortgage has become increasingly important in the current economic climate, especially as many fixed rate mortgages are ending for some borrowers, leaving them facing potentially higher monthly payments. However, with the right approach, it is possible to reduce your monthly payments and overall interest paid on the loan. From shopping around for the best rates to making extra payments, here are 4 strategies that can help you save money on your mortgage.
1. Review your interest rate
This is probably the biggest way to save on your home loan.
Banks often offer great deals to new customers whilst loyal, existing customers might find themselves stuck on higher rates, paying out extra dollars for no good reason.
Check the interest rate you are currently paying on your loan and compare it to what is being offered by your lender on their website. If the advertised rate is lower, call your lender and ask them to lower your rate – if you’re lucky it could be that easy to save money straight away!!
If that doesn’t work, have a look at interest rates with other lenders.
Yes you may need to go through the usual application process and prove you have enough income to make the repayments – but imagine what you can do with the extra thousands of dollars saved over the course of the loan.
2. Put your savings in an offset account
An offset account can be an easy way to reduce the interest you are charged on your home loan.
It operates like a transactional savings account that is linked to your home loan balance and any money in this account offsets your loan balance, reducing the amount of interest you are charged.
For example, if you have a $300,000 home loan balance and $20,000 in your offset account, you’ll only get charged interest on $280,000.
3. Ensure that you’re not overpaying on fees
Most borrowers will have to pay some fees related to their home loan but it’s important to check that you’re not paying more than you need to.
Review your loan to make sure you’re not paying for features you aren’t using as some home loan features are built into home loan packages and may attract monthly or annual fees but are only useful if you’re using them.
Plus, there are lenders offering zero-fee or low fee home loans, so it’s worthwhile being open minded about making a switch to avoid paying regular service fees.
4. Make fortnightly loan repayments
How frequently you repay your loan also affects the ultimate cost of it.
This is because lenders calculate your interest charges daily.
The earlier you repay it, the less total interest you pay.
A simple way to take advantage of this fact is to make fortnightly, rather than monthly, repayments on your loan.
There are 12 months in a year, but there are 26 fortnights. Switching to fortnightly repayments, therefore, gives you an extra month's repayments each year.
Just make sure that you can afford this and it fits in your budget
If you would like to explore how you can save money on your mortgage, contact our office and speak to Greg Wood from Primo Finance.