3 Tips To Save Money On Your Mortgage

Reducing the interest on your mortgage can have a wide range of benefits not only will it put you in a more stable financial position, but it’ll reflect more positively in your credit score. The size of Australian home loans has been growing for some time, which is why it’s so important to think about repaying what you owe sooner rather than later.

Long-term mortgages can seem almost impossible to reduce when you first take them out, but this certainly isn’t the case. There are many different strategies to get your interest rate down and potentially even leave you mortgage-free sooner than you anticipated.

If you’re seriously considering bringing down your mortgage interest rate in 2016, then here are just some suggestions on how to make it happen.

Know how much you owe

The best place to start is to have a sound knowledge of exactly how much you owe. There’s little point in dealing with uncertain figures, so contact your lender and discuss what your current repayment schedule looks like.

Figures from the Australian Financial Group show the average home loan stands at around $444,000. However, this will vary depending on a number of factors, including the type of property you’ve bought and its location.

If you’re paying more than 3.84% interest, then use our free 2 minute loan assessment tool to get a better deal.

Be aware of the specifics of your mortgage

Every home loan is different, which is why you’ll need to find out exactly which regulations apply to the product you’ve taken out. It’s possible there are terms and conditions linked to how much you can overpay over the lifetime of the mortgage, or that there might be an early repayment charge.

Take a closer look at the small print associated with your mortgage, or get in touch with your lender directly if you’re still unsure. This might help dictate how much you’re able to reduce your interest rates by.

So, here’s our 3 tips on how to save on your mortgage:

1. Change how often you’re making payments

Most people decide to pay off their mortgage in monthly installments, but there might be potential to increase the frequency. This will bring down the interest you are repaying on your mortgage, while lowering the final balance on your home loan.

Westpac figures show paying fortnightly minimum repayments, rather than monthly on a $250,000 at 7 per cent could amount to saving more than $85,000 in interest costs. Not only this, it would shave over six years off the lifetime of your mortgage.

2. Make regular over payments

The AFG suggests there’s definitely scope for bringing down payments. Repaying an extra $100 a month on a $444,000 mortgage taken out over a 30-year period would reduce the term by 2.7 years.

Carrying out these sorts of calculations could help you see just how easy it is to reduce the interest you pay on your mortgage. Sometimes seeing the figures in black and white is all you’ll need to focus your attention.

Most lenders will also let you pay off a lump sum from your mortgage. So, if you’re fortunate enough to receive an unexpected windfall, you could find it beneficial to use at least some of it to make an overpayment. Check the terms and conditions of your specific loan to find out if this is possible.

3. Refinance to a lower interest rate

If you’ve held your current home loan for over 2 years, it’s likely you’re eligible to refinance, meaning you can switch to new deal with a better rate – giving you considerable savings each month. We’ve put together a free 2 minute loan quiz to see how much you can save if you were to refinance.

There are various different competitive deals around at the moment, so you’ll need to do some homework to find which one is the right choice for you. The Reserve Bank of Australia (RBA) lowered the official cash rate to 1.5 per cent back in 2016, leading many lenders to cut rates on their home loan products, which is great news for people wanting to refinance.

Remember that as a refinancer, you’re in the driving seat. Lenders will be competing for your business, so now is a good time to take a closer look at what’s available and find a more competitive product that still meets your needs.

If switching mortgage provider isn’t practical, then don’t be afraid to bargain with your existing lender. They might be in a position to match the best deal being offered by a competitor, ASIC suggests, or could waive certain charges if it means keeping you on board.

Compare all the fees and charges associated with your account and see what is out there. It might seem more convenient to stay where you are, but it can be advantageous to take a look around. You should treat your mortgage in the same way as any other financial product, including insurance and credit cards, where you wouldn’t necessarily automatically renew without doing some homework.

The next steps

Planning to reduce the size of your mortgage this year could be a wise strategy, but speaking to an expert is the best place to start, as they’ll be able to advise you on what products are available.

If you’d like to see if you’re eligible for refinancing your mortgage, and for an obligation free chat to one of our friendly brokers, click here to take our quiz. It just takes two minutes.