Aussie John’s secrets to saving big on interest
MAKING small savings is the first big step to benefit from record-low mortgage interest rates, says the man who was pivotal in bringing cheaper home loans to Australians 25 years ago.
When John Symond started Aussie Home Loans in the 1990s, big banks cut their own mortgage interest rates by
2-3 per cent as lending competition intensified.
Since then there’s been a stack of rate cuts from the Reserve Bank, and Mr Symond says the path to success has changed little in almost three decades. “People have to be aware that every little bit counts,” he said.
A few dollars spent on daily lunches, coffees, entertainment or other small lifestyle costs adds up to thousands of missing dollars a year.
Mr Symond suggested matching your lifestyle spending – such as a restaurant meals – with extra injections into the home loan.
“A lot of people think, ‘What’s $50 going to do?’,” he said.
“But do it twice a month and you have knocked more than $1000 off your home loan.
“There’s no new secret. There’s no miracle.”
Mr Symond said making some home loan tweaks could turn a 25-year mortgage into a 15-year mortgage.
DIVIDE AND SAVE
Divide your monthly mortgage repayment in two and pay that fortnightly. “It means you end up paying one full extra month per year,” Mr Symond said.
PAY WAGES DIRECTLY INTO YOUR MORTGAGE
Using either an offset account or redraw facility, borrowers have every dollar working against their home loan principal until it’s needed. “That way they are getting the full lending rate as interest on their salary,” Mr Symond said.
BE SMART WITH DEBT
He said most people had credit cards, car loans or other personal debts charging higher interest than their mortgage.
Switching that debt into a low-interest mortgage can slash interest “but you have to be disciplined”, he said.
“I recommend that they set up a split loan within their existing loan, and transfer the debt to the home loan but with strict criteria.
“Don’t just drop it into the home loan and turn the car loan of five years into a 30-year home loan and pay three times more interest. Set it up to continue making the full regular monthly payment that they were paying – instead of paying 10 or 12 per cent they are paying 3 to 4 per cent.”
This delivers a double benefit of paying off personal loans faster and building a habit of paying more off the home loan to wipe it out faster, too.
AVOID INTEREST-ONLY MORTGAGES
“I have always been against interest-only loans for owneroccupiers,” Mr Symond said.
In many cases it might only cost a few hundred dollars a month more to be paying off principal, too, because principal and interest loans have lower interestrates.
“Pay back your home loan in the shortest possible time because you never know what’s around the corner,” he said.