The ultimate checklist to paying back your home!
1. Make extra repayments
Making consistent and ad-hoc extra repayments like bonuses and tax returns reduces the principal on your mortgage faster. The sooner you start making extra repayments, the more time and money you save.
2. Make your first repayment on settlement date
Your first home loan repayment is normally made a month after settlement. Make your first repayment on settlement day to reduce the principal before the first lot of interest accrues on the amount you have borrowed.
3. Make extra repayments immediately
Extra regular repayments made from the beginning of your loan term have a big effect on the length and costs of your loan. Even if you’re already more than five years into your loan term, you can still make big savings by making extra repayments now.
4. Make repayments more often
If your loan repayment amount is calculated monthly, you can make big savings if you pay fortnightly instead. You’ll pay an additional month off your mortgage every year which reduces the principal faster.
Check the fine print in your loan documents to make sure your lender hasn’t calculated your fortnightly repayments to equal half what the monthly repayment would have been – this won’t save you time or money. Check out the extra repayments calculator to see how much you pay affects your loan.
5. Look for a flexible, cheaper rate
Your mortgage broker will help you compare home loans to find a loan with the right amount of flexibility at the right price. If you’re going to refinance, make sure the costs don’t outweigh the benefits.
6. Pay loan fees and charges up front
Pay establishment fees, legal fees and Lenders Mortgage Insurance (LMI) (if applicable) upfront rather than rolling them into your loan. You’ll save thousands of dollars in interest over the life of the loan.
7. Look for loans with free features
Some loans charge for every redraw or extra repayment, rate changes or to take repayment holidays, but some won’t. You can save on fees if you know what you’re likely to use and find a loan that doesn’t charge you to use it.
8. Negotiate to make savings
Negotiate with your lender to save – interest rates and establishment fees in particular are good places to start your negotiations. A good savings, credit and work history will help you save more.
9. Review your loan regularly
Reviewing your loan regularly to make sure it’s still working for you. Situations change, so being on top of it rather than waiting months, or even years, will potentially save you a lot of money.
10. Take a loan with an offset facility
With an offset facility, the balance of the account is offset against the balance of the loan for interest calculations.