Saving money on your mortgage
Buying your own home is likely to be one the largest purchases you’ll ever make. For most of us, it means taking out a loan that will take a number of years to pay off. So choosing your loan as carefully as you choose your home makes sense. And once you’ve taken out your mortgage, it pays to make the most of it.
Whether you’re already paying off a mortgage, or shopping around for the best loan for your circumstances, there are ways that you can reduce the amount of interest you pay and shorten the life of your loan. We’ve put together some of the top tips below.
Top 5 tips
1. Get the best rate. Getting the best rate doesn’t necessarily mean going with the cheapest lender. You can get up to 0.7% p.a. off your interest rate with a package, which generally applies for loans of $250,000 and over. If you’re living in a capital city, chances are you’re borrowing at least that much. And if you already have a mortgage, check to see that you’re getting the best possible deal.
2. Choose the right mortgage. Choosing the right mortgage means more than just the lowest interest rate. You may be willing to pay a slightly higher rate for the flexibility to make additional repayments, take repayment holidays or access an offset account. If you’re likely to use these features to save on your mortgage, the longer term financial benefits may outweigh slightly higher interest rates.
3. Make lump sum repayments. Using a windfall such as a tax return to pay a lump sum into your mortgage can make a big difference. It reduces the principal amount that the interest is calculated on, and means you pay less interest on your loan overall. Check out our Home loan calculator to work out how much you could save.
4. Pay more. Paying just a little more with each payment can save you a significant amount over time. You can use our Home loan calculator to chart the interest and time you’ll save on your mortgage. And when interest rates fall, if you decide to maintain your existing payments, you’ll be effectively paying off more of the principal with no apparent sacrifice.
5. Set up a mortgage offset account. A mortgage offset account allows you to offset, or reduce, the interest charged on your home loan by letting you pay down the principal loan amount with your savings.
The more money you have in an offset account, up to the balance of the loan, the bigger the savings and the faster your loan can be paid off.
Talk to one of our expert lenders today about taking the Mortgage Check. Call 13 2224 or drop into any branch.
This information does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of this information in relation to your own situation before acting on it. Commonwealth Bank of Australia ABN 48 123 123 124.