How you can save $4700 on your mortgage
SAVVY borrowers could save $4700 in 12 months by making a handful of changes to their mortgage.
Home loan rates continue to fall, delivering customers a once in a lifetime opportunity to rapidly reduce their debt.
Some rates — both fixed and variable — are now below 3 per cent.
New figures from financial services firm Canstar found there were huge annual savings to be made if customers made five simple changes to their mortgage.
Simple tweaks including getting a better interest rate, pumping in extra cash and not paying an annual fee are a good way to start.
The firm’s group executive of ratings and financial services, Steve Mickenbecker, said two consecutive rate cuts by the Reserve Bank of Australia and the arrival of the new financial year should prompt borrowers to swing into action.
“Take matters into your own hands and do your own comparisons,” he said. “There’s some amazing deals out there but you might have to switch lenders to save.”
Here are some ways to become mortgage-free sooner. 1. Switch to a cheaper rate
Sisters Lisa, 42, and Tania Costello, 41, both school teachers, bought their property together in 2014 and recently refinanced. They switched from National Australia Bank to Macquarie Bank, which instantly delivered savings.
Their mortgage interest rate fell from 4.47 per cent to just 3.44 per cent, saving them thousands of dollars a year on their $540,000 loan.
Lisa said they wanted to “pay down their loan as quickly as possible” and refinancing would save them about $390 a month. 2. Annual fees
Borrowers can easily spend hundreds of dollars paying an annual fee to maintain their home loan. But Canstar data found borrowers could save on average $75 a year by switching from the average home loan annual fee to no annual fee loan.
Mr Mickenbecker said there’s plenty of no annual fees loans available. “A lot of no-frills style products have low or very low fees,” he said. 3. Use an offset account
These daily transaction accounts are linked to your mortgage. If you have a $500,000 loan and $10,000 in an offset account you will only be charged interest on $490,000. Canstar figures found this could save borrowers $422 a year.
Mr Mickenbecker said it’s an easy way to bring down monthly interest charges. “Offset and redraw accounts do the same thing, they both allow you to make extra repayments with confidence if you need the money you can get the money back,” he said. 4. Paying extra
By throwing an extra $50 a week on to your $500,000, 30year home loan borrowers would only save $50 in interest over 12 months.
However by making this extra repayment over the loan term it would save them a massive $62,668 in interest costs and they would pay off their loan four years and five months sooner.