5 top tips for saving on your home loan
With interest rates at their highest since 2009 and the cost of living on the rise, the prospect of taking out a home loan is stressful for many aspiring buyers.
It’s more important than ever that real estate agents show empathy. One way of doing that is being armed with tips for saving on home loans.
Here are five of the most helpful.
Interest rates are higher everywhere, but there are still big differences between providers.
Prospective buyers should consult a variety of banks and non-banks to find the best deal.
Those with a home loan should explore whether refinancing will save money.
Setting up an offset account
The money in an offset account is offset against the home loan. This means the buyer pays interest on the difference only.
For example, if the home loan is $500,000 and there’s $400,000 in an offset account, interest will be paid on $100,000.
The offset account remains accessible – like a savings account.
Getting the repayment schedule right
Most providers allow repayments weekly, fortnightly or monthly.
Some borrowers may find they can pay off a little more by changing the frequency of their repayments.
For example, $2,000 repaid monthly is a total of $24,000 over a year. However, $1,000 repaid fortnightly is a total of $26,000.
Making extra repayments
Usually, buyers with variable rate home loans can – and should – make extra repayments whenever possible.
Most home loans that allow extra repayments also have a redraw facility. This enables the borrower to withdraw from any amount beyond compulsory repayments.
Turning a home loan into a package
Home loan packages offer a variety of benefits. These may include lower interest rates, fee-free credit cards, and extra offset accounts.
It’s important to read the fine print to ensure the savings offered make sense in the long term.
Helping prospective buyers
External factors, like high interest rates, are beyond our control. But, with these tips, real estate agents can offer some help to prospective buyers.
- Prospective buyers should shop around for the best deal, while those with a home loan might consider refinancing.
- An offset account reduces the total amount on which interest is repayable, while retaining the borrower’s access to their money.
- Rejigging a repayment schedule may mean long term savings.
- By making extra repayments, buyers can pay off their home loans faster.
- Home loan packages offer an array of benefits, such as lower interest rates and fee-free credit cards.