Save $60k and years on your home loan

HISTORICALLY low interest rates have saved mortgage holders thousands, but some simple tweaks can boost those savings further.

Changing repayments from monthly to fortnightly is one example, explains Mortgage Choice CEO John Flavell.

“Say you have a 30-year loan of $500,000 with an interest rate of 4 per cent. Your minimum monthly repayment would be approximately $2387,” Mr Flavell said. “If you pay fortnightly and divide your monthly repayment in half$1194 per fortnight- you could save $56,643 (in total).”

Making even minimal extra repayments boosts long term savings, Canstar spokeswoman Belinda Williamson said.

“If you have a $300,000 loan over 30 years and increase monthly repayments from $1520 to $1720, you stand to save almost $60,000 in interest and could repay it six years earlier,” Ms Williamson said, adding that if you can’t pay extra all year, seasonal adjustments will help. “It might mean once the current footy season wraps you put that ticket money towards your mortgage.”

Offset accounts or redraw facilities can lessen interest payments significantly.

“Consider having your pay and tax return deposited into your offset and with the addition of a redraw facility, withdrawing when you need it,” Ms Williamson said. “If you had a loan of $300,000 and had already repaid $100,000, you would pay interest on $200,000. But if you had $50,000 in a linked offset account, you would only pay interest on $150,000 of (the) balance.

“Based on a loan amount of $300,000 over 30 years, if you deposit $2,000 into an offset account you can shave around $9,650 in interest and repay it three months earlier. If you increase your offset deposit to $10,000, you can save almost $30,000 in total interest and cut your term by almost 18 months.”