Five ways to reduce your mortgage

By the resi financial blog team, 15 September 2014

Tips to save on your mortgage

It’s always a good idea to try and pay off as much of your mortgage as possible – especially when interest rates are as low as they are now.

Here are five tips that will help make a bigger dent in your home loan.

1. Pay more than you need to
When choosing a home loan, you should be factoring in an interest rate that is at least two per cent higher to ensure you can still make repayments when rates rise. So why not start making your repayments at this higher rate anyway? Not only will you be paying off more of your mortgage but when rates do rise you won’t even notice.

2. Make more frequent repayments
This is one of the simplest and most effective ways of paying off your loan more quickly. The best way to do this is to split your monthly payment in two and pay every fortnight. This works in your favour because there are 26 fortnights in a year but only 12 months. Paying every fortnight means you will effectively be making 13 monthly payments each year thus paying down your mortgage more quickly.

3. Opt for a mortgage package
Many lenders offer financial packages that include discounts on insurance, free-free credit cards and bank accounts. Every little bit helps, so speak to your lender about what they can offer you. Also be aware of the professional packages on offer for loans taken out over $150,000. They also come with discounts attached.

4. Consolidate your debts
Many lenders will let you consolidate all your debts into your home loan. As your mortgage is likely to attract the lowest rate of interest, it makes financial sense to consolidate all debts into it – this includes credit card debt and personal loans. By paying them all off at the lower rate you’ll be saving money. But even after you consolidate, keep making the same repayments into your home loan – this will save you money in the long term.

5. Switch to a lower home loan rate
It’s very common to be a “stick” customer, who doesn’t move from a particular provider even though you may be able to get a better deal, and save thousands elsewhere. To really make a difference to your mortgage, take the time to research other home loan options , and move to another lender if you find a better deal. Of course, always speak to your existing lender first to see if they will match the deal, and be aware of any fees and charges you may need to pay  when exiting your loan.

Categories: Mortgage, tips