How to save thousands of dollars on your mortgage each year

Take advantage of the competitive mortgage market, an industry expert says.

Bethany Schenscher with her parents Julie and Peter. Picture: Russell Millard

Shopping around to compare and find the best mortgage option can save home owners thousands of dollars each year, an industry expert says.

With cost-of-living pressures continuing to bite, HomeStart CEO Andrew Mills says home owners should take advantage of the current competition between lenders vying for new business.

“It is a competitive market at the moment where talking to different lenders can unearth some better options,” he says. “People might also consider talking to a mortgage broker who will have good visibility of the latest deals across the market and provide good access to other lenders they may not have considered.”

Reviewing home loan terms and repayments can also help home owners save money and provide financial stability during rising interest rates.

“One repayment option that is quite popular is for people to repay their mortgage loan fortnightly,” he says. “This means you get an extra month’s repayment over the course of a year, which can help to repay the loan faster and save you some interest in the long run.”

A South Australian Government organisation, HomeStart is committed to providing home loans that make home ownership a reality for more South Australians.

Established in 1989, HomeStart has helped more than 87,000 South Australians buy a home, including one-in-four first home buyers. “A lot of people re-entering the market after their life circumstances change will also turn to HomeStart for assistance,” Mills says. “We help more than 2000 home buyers every year in the state, so we are an important part of making home ownership affordable in South Australia.”

HomeStart chief executive officer Andrew Mills. Picture: Supplied

HomeStart focuses on breaking down the three major barriers people face when trying to buy a home – upfront costs, borrowing power and confidence. Products include a 2 per cent deposit Graduate Loan and a 2 per cent deposit home loan for first home buyers building a new home through one of HomeStart’s partner builders.

“With the abolition of stamp duty, a first homebuyer purchasing a $600,000 house and land package could save approximately $11,330 in stamp duty (stamp duty is only charged on the land portion of the value), and also be eligible for the First Home Owner Grant worth $15,000. With a loan from HomeStart, this customer could get into the market with a deposit as little as $12,000.”

Additional loans allow borrowers to boost their borrowing power without increasing monthly repayments. “Our Shared Equity Option makes a huge difference to people in the market, allowing them to borrow up to 25 per cent of the purchase price as an interest-free and repayment-free loan,” Mills says.

“When home owners sell that home down the track, they simply share up to 25 per cent of the capital gain or loss with HomeStart as they repay the Shared Equity portion. It’s a terrific way for people to access the market even though prices have risen significantly. Around 35 per cent of HomeStart customers in the past 12 months are using Shared Equity to get into the housing market. We also have innovative loan products like the Starter Loan, which offers up to $10,000 interest-free for people below a certain income threshold to help with upfront costs like stamp duty.

“When you look at the recent government initiatives, there is a huge pipeline of affordable housing opportunities coming into the state over the next few years. HomeStart supports those opportunities by ensuring there are affordable finance options for people to buy these homes.”

Measures help Bethney make her home move

Bethany Schenscher with her dog Issy. Picture: Russell Millard

Registered nurse Bethney Schenscher feels the time is right to move out from the family residence – and into a place of her own.

And the 26-year-old is now in a much improved position to do just that, thanks in part to the state government’s move to scrap stamp duty completely for first home buyers purchasing or building a new home, or purchasing land to build upon.

For Schenscher, who works at the Lyell McEwin Hospital, the combination of the stamp duty abolition and the first home owner grant means opening the doors to her dream of home ownership much earlier than expected.

“I needed something to work towards and wasn’t ready to travel so I thought I would make home ownership my little financial goal,” she says. “I didn’t think it would be achievable this quickly but definitely stamp duty relief and things like that will make it so much easier for me.“

Schenscher expects to make a total saving of as much as $50,000 on the three-bedroom Fairmont home she’s having built at Villawood’s St Andrews estate in Adelaide’s north. She also stands to benefit from a discount Villawood extends to all health care workers who choose to build there.

“I’ve ended up saving so much money – probably $40,000 to $50,000 all up, including $10,000 that Villawood give off the land cost to health workers,” she says. “It’s allowed me to afford this whole process. I was originally looking at established homes ... but the prices were just at crazy levels.

“So I looked into the building side of it all. Everyone says building takes too long – or it’s too this or it’s too that – but this will end up being so much cheaper.”

Schenscher – who is hoping for the slab of her new home to be down by the middle of this year, with a view to picking up the keys 12 months later – is thankful for the cost-saving measures that will put her on the path to financial security.

“I would have been really struggling to do what I’ve done without them,” she says. “I’ve gone for a 300 sqm block – three bedrooms, two bathrooms, a little backyard and alfresco – I wouldn’t have been able to get something of that size otherwise. It’s perfect for my first home – and I’d like to be able to keep it as an investment property in the future.”

Schenscher encourages other people looking to get into the market to explore their options and what savings they might be able to make. “I would say just save – and ask questions,” she says. “Reach out to people who have just recently bought a block of land or just recently built. “Talk to a mortgage broker ... go on to the websites and have a look and see what you can get.”