- Posted 31 Mar
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Generally speaking, when you have a home loan, it can be difficult to save money and pay off your mortgage. But having access to the right advice and recommendations could mean that you not only save money on your home loan, but that you also make money.
Follow these five tips on how to make money by saving money on your mortgage.
Five Tips to Save Money On Your Mortgage
- Use an offset account. This is an account that is linked to your mortgage. Money goes into this account and reduces the overall amount of your mortgage, reducing the interest and shaving a good 4-5 years off your mortgage.A good way to use your offset account is to have your pay going directly into this account and using your credit card to pay for your monthly living costs. That way you can leave your pay sitting in the offset account for the entire month before paying off your credit card at the end of each month.How does this work? Say you had a $600,000 mortgage and your combined monthly income was $5,000 and you had savings of $10,000, that would give you $15,000 in your offset account. This would reduce the mortgage to $585,000 so you would only pay interest on this amount. And if you have an offset account that earns interest, you’ll also make money and save money at the same time.
- Pay more often. If you get paid monthly, try splitting up your mortgage payments into fortnightly payments instead. There are 26 fortnights in a year, which means that you actually end up with a ‘thirteenth’ month, reducing a 25 year mortgage by 5-7 years. This saves you a significant amount of money and reduces the amount of interest you pay monthly.
- Increase the amount you pay. Make sure that your mortgage allows you to increase payments without any fees or penalties. If you can pay more than the minimum amount, you’ll be paying off the principal and the interest, reducing the life of your loan.
- Deposit lump sums. If you receive a tax refund or a large rebate on Medicare or some other lump sum amount, deposit this into your mortage. You’ll be paying off the principal each time you do this. This helps to reduce the life of your loan and allows you to look at investing your savings in other areas.
- Review your mortgage annually. Do this each year to ensure that you are getting the best interest rate possible. While it’s not feasible to refinance your loan every year, it is a good idea to have a chat with your bank manager about fixing and floating parts of your mortgage to make the most of low interest rates. By doing this each year and checking to make sure you have the best deal, you’ll be able to save money and use your savings to invest in other areas.
There are many different ways that you can save money on your mortgage. Make sure that you are doing at least a few of these suggestions to ensure that your mortgage is paid off quicker.
If you need help with getting a mortgage or refinancing, the team at Australian Credit and Finance would be happy to help. Contact them directly on 1300 735 557 today.