But how can you tinker with your existing home loan, or take out a new home loan, that will save you money?
Below are a few tips we’ve spotted in media lately. It’s also important to get independent financial advice or see an independent mortgage broker to get the best advice tailored to your personal circumstances.
Tips to save money off your mortgage:
- Ask your lender for a lower interest rate. This might seem strange when interest rates are rising, but often lenders will have lower rates for new customers that they will sometimes extend to existing customers if it makes the difference between you staying with them or refinancing to another lender.
- Use an offset account. If you have some cash savings, consider parking it in an offset account which effectively reduces the amount of interest you pay. For example, if you have a $500,000 loan and $50,000 sitting in offset, you’ll only pay interest on $450,000.
- Take out a loan with a longer loan term. This is a controversial option. Why? The quicker you pay off your loan, the less interest you pay over the life of the loan. This can equate to savings of tens or even hundreds of thousands of dollars over the long term. But if your cash flow is seriously squeezed now, then a loan over 30 years will have lower repayments than one with a loan term of 25 years. Domain recently published an article on the pros and cons of a new 35 year loan that is worth a look if you’re considering loan terms.
- If your current lender won’t come to the party with a great rate, then see an independent mortgage broker and find out if another lender could offer you a better deal.
- If you’re in financial stress, contact your lender sooner rather than later. If you’ve hit a financial stumbling block, such as job loss or illness, banks may offer you temporary measures such as interest only payments, or a repayment pause, til you get back on your feet. Again – seek financial advice to understand the pros and cons for you.
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