Purchasing a home is one of the most exciting, but expensive, events in our lives. Learning how to be mortgage-savvy is one way to reduce the financial impact of the purchase, allowing you to save huge amounts over the life of the loan.
This involves getting a good understanding of how much interest you will pay over the life of the loan and how you may be able to offset some of the costs and ensure you never miss a repayment. Your mortgage is probably the biggest debt you’ll ever have, so it’s worth managing it with the utmost seriousness and attention to detail.
1. Use a Budget
Budgeting is something that we should always be doing, but it’s essential once you have a mortgage. When you have repayments to meet, it’s no time to be overspending. Remember, we can’t control the economy but we can control our budgets. Start tracking your incomes and eliminating unnecessary expenses today!
2. Secure a Lower Rate
Ensure you pay the least interest possible. Even a rate reduction as little as 0.5% could save you tens of thousands over the lifetime of the loan. With a huge variety of loan products and countless online comparison tools, consumers have more power than ever when it comes to finding a mortgage with an attractive rate.
That being said, you shouldn’t do it yourself. A good mortgage broker can compare all the available products on the market and find the best match for your circumstances. Because they are paid through a commission from the institution providing the home loan, you need not worry about incurring additional costs.
3. Increase Your Repayments
Once you secure a lower rate, focus on paying off the mortgage as quickly as possible. This allows you to minimise the overall interest you pay. This might be easier said than done for many households but if you can spare some extra cash for extra repayments, the rewards in the long term are significant.
4. Review Your Financial Position Regularly
It’s essential to keep track of your income and expenses in detail so you always know your financial position. This allows you to make the most of windfalls and ensure you can cope if rates do rise.
By reviewing your financial position on a regular basis, you can avoid financial surprises as you’re always on top of what income is coming in and what expenses are going out.
5. Review Your Costs Periodically
Once you know what your financial position is and how much you are spending, it’s far easier to lower your expenses. Review everything from your mobile phone plan to your utility providers to see if you can find or negotiate a better deal.
Consider other ways you can lower costs, such as using online store instead of shopping in store and eliminating unnecessary expenses like cable TV and expensive take away meals.
6. Put Income in Your Offset Account
An offset account is a great way to save on interest every single day. This is because interest is charged monthly but calculated daily. Depositing your income directly into an offset account helps you pay your home loan off quicker by lowering your interest payments.
7. Pay Fortnightly
With 26 fortnights in a year compared to 12 months, making repayments fortnightly rather than monthly is a great way to pay off your mortgage. With many Australians being paid on a fortnightly basis, it can be easy to do as well.