Our Loan Tips to Slash Thousands Off Your Home Loan

There’s a lot you could be doing to cut the cost of your mortgage.

Contact us to help you with any of these tips:

• What rate are you paying?
• Pay more often and a little more
• Make your surplus cash work harder for you
• Consolidate any other loans
• Watch out for the lure of a honeymoon
• Fixing Your Rate

What rate are you paying?

If you’re paying the standard variable rate, you shouldn’t be. There are better deals around. Anyone still paying standard rates for their variable loan should look at other alternatives as you more than likely will save thousands by simply switching to a lower rate loan such as Basic or Discount variable loans. Consider our Advantage Rate Loan.

Most people  believe that Basic or Discount variable loans have less features than a Standard variable loan, so they agree to pay $300 per year or more for a Professional Package from the big banks. They don’t need to.

Watch out for basic variable loans that don’t offer flexible features. They offer cheap rates, but if they do not allow for salary crediting and convenient and unlimited redraws, you will not achieve the long term savings you want.

This is not the case with our fully featured Advantage Rate Loan. With unlimited redraw, salary crediting, unlimited additional repayments and one of the most competitive rates around you can easily save thousands – without paying annual fees for bundled product, like credit cards, that you don’t need..

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Pay more often and a little more

Dividing your minimum monthly repayment into two fortnightly payments can reduce the term of your loan because there are more than two fortnights in every month. Dividing your original monthly repayment into two means you actually pay more over the course of a calendar month. Also, when interest is calculated daily, the more frequent your repayments results in less interest being charged to your loan over the course of a month.

Add to this a small amount every fortnightly you can comfortably afford over the minimum required repayment and you will slash years of the term of your loan.

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Make your surplus cash work harder for you

Use cash savings to help pay off your loan quicker. If you have a home loan rate at say 7 per cent, every extra dollar you pay off the principal is another dollar you are not paying 7 per cent on each year. If you instead put that extra dollar into a savings account you are only going to earn 2 or 3, perhaps 5 per cent at the most and you’ll pay tax on these earnings. Therefore putting savings into your loan earns you twice as much as a savings account and you keep the tax man from your surplus cash. Check out our loan structuring page.

These days, redraw facilities available on most variable loans allow you to take back those extra payments if needed anyway.

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Consolidate any other loans

Always consolidate any high rate unsecured loans such as personal loans, car loans, store and credit cards with your home loan if you have equity in your home.

Some people will advise you against consolidation because the loan terms for unsecured loans are generally less than mortgages. You are still better off consolidating if you can with a low mortgage rate, while still maintaining the repayments you had with your unsecured loans. By doing this you will payoff your total debts faster with a much lower rate of interest and save thousands.

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Watch out for the lure of a honeymoon

Known within the industry as “teaser rates,” introductory or honeymoon rates are often a con, enticing you with a low rate in the first 6, 12 or 24 months and then, after the honeymoon, mugging you with a high standard variable rate. Your only option then will be to refinance, sometimes incurring an exit fee or deferred establishment fee.

Look for a fully featured basic variable rate such as our Advantage Rate Loan that offers a competitive rate for the life of your loan rather than just a honeymoon period.

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Fixing Your Rate

From time to time, the option of a fixed rate, ranging from 1 year to 5 years, can look attractive. But in practice, most people who choose a fixed rate for all or part of their loan, come to regret it. Why is that?

Choosing a fixed rate is like betting against the money markets that the average variable rate in the years ahead (depending on the term you choose) will actually work out higher than the fixed rate they are offering today. You could win the bet (though that is unlikely), but rarely will the loss of flexibility be compensated by big interest savings overall.

One exception to this general advice could be investors who want a “set and forget” loan, where their payments are covered by rental receipts. But even they should beware: Breaking a fixed rate loan contract can be very expensive, so always think twice before fixing your rate.

The most important ponts are to have a loan that allows you to fix all or part of your rate at any time and to have access to helpful advice to assist you to weigh up your options. Test MyLoan MyWay; we will always be pleased to discuss your options in full.

Click here to apply or call us now to speak to one of our experienced home loan professionals and we will work out how much we can SAVE you by doing it the NEW WAY!

^# Online Banking is a service provided by ING Direct, a division of ING Bank(Australia). MyLoan MyWay is not a bank or an authorised deposit-taking institution.

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