You’ve been approved for a loan, bought a property, and you’ve designed your budget around your mortgage repayments. Not only can Smart Home Deposit help you save for your deposit, we can also help you save on your home loan.
Firstly, we need to establish the true cost of a home. It's not only the $300,000 you paid for the property, but also your interest and potentially your Lenders Mortgage Insurance (LMI). A $300,000 loan with a 4.45% interest rate will cost you $544,016 over the life of a 30-year mortgage.
Here are four steps that can help you save on your home loan!
1. Secure a Lower Rate
There is an abundance of lenders in the marketplace and just like any other business, financial institutions are prepared to reduce their rates in order to attract new customers. Online comparison tools can keep you informed on products that suit your needs. Considering our original example, if you were to negotiate a rate reduction from 4.45% to 4.05%, you would save over $25,000 over the life of your 30-year loan.
2. Increase Your Regular Repayments
This step may seem obvious, but even a seemingly small monthly contribution on top of your regular mortgage repayments can save you a huge amount of money. Considering a loan of $300,000 at 4.05%, if you were to pay an extra $25 per week you would save over $70,000 on your 30-year mortgage! $25 a week is just a coffee a day; small changes can produce surprising amount of cash.
3. Pay Fortnightly
Many Australians are paid their salary on a fortnightly basis, but mortgage repayments are generally calculated on a monthly basis. There are 12 months in the year, but 26 fortnights. This means that if you pay your mortgage fortnightly, you are essentially making an extra repayment each year without having to find extra money in your budget.
4. Use Smart Home Deposit to Save a Larger Deposit
While it is possible to obtain a loan with a 10% deposit, it's not always advisable. If you were to use Smart Home Deposit to save 20% or more of the purchase price of your desired property, you will not have to take out LMI. This can save thousands over the life of your loan and allow you to choose from a wider range of loans.
Utilising these four steps from Smart Home Deposit, your home loan will be more manageable and will be paid off more quickly.