Property Investor Tips
Mortgage tips to cut costs
Posted on Wednesday, March 10 2010 at 11:48 AM
A mortgagee's circumstances can change, so it's important to regularly review your home loan structure to maximise cost savings, according to Commonwealth Bank Mortgage Wealth general manager James Sheffield.
"By reviewing your home loan repayment strategy," said Sheffield, "you can potentially save hundreds or even thousands of dollars which will ultimately help you pay your home loan off sooner."
The Commonwealth Bank's top tips to cut down home loan costs are:
- Make fortnightly or weekly repayments instead of monthly. With 26 fortnights every year, this is equivalent to making an extra month's payment each year – helping you to build equity in your home and pay off your loan sooner.
- Make larger or lump sum repayments, which will not only build equity in your home, but also reduce your loan term and save on interest (check the terms and conditions of your loan regarding early repayment or lump sum payments).
- If you're concerned about volatile interest rates, consider splitting your home loan (part fixed, part variable) while still enjoying the flexibility that a variable rate offers.
- Use an offset account. Deposit your income and savings into an offset account, the money in your account is then offset against what you owe on your home loan, thus reducing the interest you pay. An offset account is also a tax effective way to reduce your home loan, as your interest paid on your savings is tax-free.
- Pay your salary or other income directly into your loan account. With a regular line of credit you can reduce your loan balance and build equity at the same time.
- Align your loan repayments with when you are paid. Set up your home loan repayments with the same regularity as when you get paid. By structuring repayments this way, you'll always be in a position to maximise the amount of money paid against your home loan.
- Manage your home loan online. Not only do you have instant access to your loan details, but you can also mange your repayments.
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