Five steps to save on your home loan charges
HOME loan rates are as low as 3.44 per cent. These are five steps you should take to lower your mortgage charges.
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HOME loan customers should be checking exactly what interest rate they are paying as banks continue to push rates up.
In recent weeks many lenders including AMP, ING, Bank of Queensland, Bendigo Bank and ME have increased rates, hitting those on variable rate deals with higher charges.
Latest analysis by financial services firm Canstar shows on a $300,000 30-year home loan the average standard variable interest rate is 4.44 per cent, but there are deals far cheaper at just 3.44 per cent.
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1LOOK AT OPTIONS
Canstar’s senior research analyst Josh Sale said borrowers with a fair chunk of equity in their home have room to move.
“There is plenty of competition out there,’’ he said.
“If you have more than 20 per cent equity in your property there’s a number of lenders out there advertising comparison rates under 3.6 per cent.”
2 NEGOTIATE
Mr Sale said any borrowers paying interest above 4 per cent should demand a better deal.
“Look at what else is available in the market and give your existing lender a phone call,’’ he said.
“Ask them if they can negotiate a rate that is more appropriate and closer to what competitors might be offering.”
3 OFFSET ACCOUNTS
An offset account — a day-to-day account linked to a home loan — gives borrowers a great way to reduce monthly interest charges.
Calculations show for a borrower with a $300,000 30-year loan and $10,000 in an offset account, if this money is in the offset for five years, they could save more than $13,000 over loan’s term.
4 CASH WINDFALLS
People’s Choice spokesman Stuart Symons said if you get your hands on any unexpected money tip it into your loan to reduce your interest charges.
“Take advantage of any windfalls that might come your way, a lot of people at this time of year get a tax refund,’’ he said.
“Think about how you can use that kind of cash to get ahead of your home loan and pay down a bit more debt.”
If borrowers get a pay rise it’s also worth tipping some of the additional money into the loan.
5 PAY EXTRA
If you can, it pays to bump up repayments, Mr Symons said.
“If you can afford it get into the habit of paying a bit more every month or every repayment than (the minimum,’’ he said.
“It gives you a buffer … if it’s set and forget and comes out of your regular account not only are you paying off your loan faster you are saving a tonne on interest over the life of the loan.”
Originally published as Five steps to save on your home loan charges