Saving on your home loan in Australia is not as difficult as it seems. If you are proactive about it and make a few small changes, you can save yourself a lot of money in the long run.
Here are a few home loan tips to help get you started.
What you can do before taking a home loan
To help you save up some cash, we’ve compiled helpful ways and suggestions before deciding on a home loan.
1. Find a home loan with the best features
When deciding on a home loan, it’s essential to compare different options. This will help you find the best deal possible on the cheapest home loan. Many online resources can help you compare home loans, so make sure to take advantage of them.
2. Choose the perfect deposit amount and the loan-to-value ratio
When buying a home using a home loan, it is expected that you provide some sort of a deposit or a down payment. The bigger the deposit, the smaller the loan amount, and vice versa.
If your loan-to-value ratio (how much you need to borrow vs how much the home is valued at) is over 80%, this is highly risky for your bank, so you might not get approved for a loan. Try to save up as much money as possible for your deposit to reduce your overall borrowing costs, as this will save you money in the long run.
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3. Look for additional help
One of the more helpful home loan tips is to look for extra help. If you need help saving money on your home loan, you may be eligible for a government grant. The Australian government offers a range of grants to help homeowners get the most out of their home loans, such as the First Home Owner Grant and the Low Deposit Home Loan Scheme.
4. Prepare your budget
Once you have found the best home loan for your needs, it is crucial to prepare a budget. It will help you stay on track with your finances and make sure you can afford your monthly repayments. One way to prepare a budget is to set up automatic savings – a fixed amount of money will be transferred from your bank account to a savings account each month.
5. Get pre-approved for a home loan
Before you start house-hunting, it is good to get pre-approved for a home loan. It will show sellers you are serious about buying a property, which could help you get ahead in the bidding process.
What you can do after taking a home loan
1. Review your home loan regularly
It is essential to review your home loan regularly to ensure you are still getting the best deal possible. You may be able to save money by refinancing your home loan or switching to a new lender. So stay on top of your finances and review your home loan at least once a year.
2. Make payments more frequently
This may sound like a waste of money, but in the long run, you’re essentially reducing the home loan and interest you pay over the life of the loan. You can try making biweekly payments or paying a larger amount of money when you’re making your monthly payments.
3. Negotiate and fix your interest rates and fees
One of the best ways to save money on your home loan is to negotiate a lower interest rate. You can do it by talking to your lender directly or using a mortgage broker who can give you crucial mortgage tips. If you are not happy with the interest rate you are currently paying, ask for a better deal.
4. Use offset accounts and redraw facilities
By using offset accounts and redraw facilities, you can save a lot of money on home loan rates. The money you have in an offset account ‘offsets’ the balance of your loan or mortgage and reduces the amount of interest you pay every month, while a redraw facility allows you to access the funds in your offset account whenever you need them.
5. Loan Packages
Loan packages are a great way to save money on your home loan. Most lenders offer loan packages that include various products, such as a home loan, car loan, and credit card. By bundling these products together, you can save money on interest rates and fees.
Recommended Reading: How Does a Mortgage Offset Account Work
If you want to take a home loan, you should always research beforehand so as to know what your best options are and if there’s a way to save money while taking a loan. Hopefully, this article full of home loan tips has provided you with some helpful information on saving money on your home loan. Make sure to stay on top of your finances and review your home loan regularly!
1. How can I reduce the interest on my home loan?
There are a few things you can do to reduce interest on your home loan, such as increasing repayments amount and frequency or using offset accounts so you can reduce your overall interest rates. Also, loan packages can reduce your interest rate by binding products.
2. Can I negotiate my home loan interest rate?
Yes, you can negotiate your home loan interest rate with your lender. You can also use a mortgage broker to help you get a better deal.
3. How to save on a home loan?
There are a few things you can do to save on a home loan, such as making extra payments, asking for a lower interest rate, and using an offset account. It’s also advisable to use a mortgage broker, as they can give you the best home loan tips.