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Tip Store: Banking: Home Loans
Rapid Mortgage Reduction Tip
Banks do not expect a payment on the day of settlement. The first payment is a month later. During that month you are being charged interest. On settlement day pay a lump sum. I did this many years ago and it reduced the term of the mortgage from 30 years to 17 years. Then I changed to fortnightly payments and extra payments when I could and the mortgage was paid in 5 years.
Contributed by Ann Green
Contributed by Ann Green
Challenge Your Bank and Save Money on Your Mortgage
Approximate $ Savings: $700
If you have a mortgage and you would like to pay less, try calling your bank and telling them you are looking for a better interest rate and see what they can offer you before you go to all the trouble of shopping around other banks. I did this recently and my bank offered me another .15% off my interest rate saving me approximately $700 in interest over the year! Better in my pocket than in the banks.
- Contributed by Lindsay James, 31st August 2011
If you have a mortgage and you would like to pay less, try calling your bank and telling them you are looking for a better interest rate and see what they can offer you before you go to all the trouble of shopping around other banks. I did this recently and my bank offered me another .15% off my interest rate saving me approximately $700 in interest over the year! Better in my pocket than in the banks.
- Contributed by Lindsay James, 31st August 2011
Small Repayment Increase Equals Big Savings
Approximate $ Savings: $65,000
Using a mortgage repayment calculator told us we could save big dollars by paying extra on our house loan. However we were already on a budget and unsure how to find the money. By increasing the fortnightly repayment by $10 a month over a twelve month period we have added an extra $120 to our base repayment amount and haven't missed the money as we have adjusted slowly to the missing money in our budget. By doing this we are effectively cutting almost ten years from our house loan and over $65,000.
Contributed by Sally Joyce, 28th July 2010
Using a mortgage repayment calculator told us we could save big dollars by paying extra on our house loan. However we were already on a budget and unsure how to find the money. By increasing the fortnightly repayment by $10 a month over a twelve month period we have added an extra $120 to our base repayment amount and haven't missed the money as we have adjusted slowly to the missing money in our budget. By doing this we are effectively cutting almost ten years from our house loan and over $65,000.
Contributed by Sally Joyce, 28th July 2010
Mortgage Muncher
My mortgage is shrinking with my mortgage muncher method of shopping. My mortgage payments are $600, rounded up of course, which I pay in weekly payments of $150. Before every purchase I look at it and decide if it is a want or a need. If it is a need, then this rule does not apply, but for all wants it does! If I wish to purchase a want, (some nice clothes or a piece of furniture etc), it must first pass through one month as equity in the house to reduce the mortgage, then I can have it. For example last month I wanted to get a new TV unit. I found one on sale for $400, reduced from $499, a saving of $99. I had to hold it on a lay-by to be able to get the special price so I paid the minimum deposit to do this. Then I increased my mortgage payments by $100 a week (the lay-by payments). At the end of the month, I took the purchase price of the TV unit from my mortgage ($400), and go and collect my lay-by. This way the extra sits as extra equity on the mortgage, reducing the interest. This works even better if the item is say $389, then I still pay the $100 each week, and the balance remains in the mortgage. You can apply this rule as often as you like, the more often, the better for your mortgage! This has the potential to reduce my mortgage by thousands over the life of the loan.
- Contributed by Rozzi Russell, 30th June 2010
- Contributed by Rozzi Russell, 30th June 2010
Repayment Calculator Keeps Motivation High
Approximate $ Savings: $3300
We have been budgeting for two years now and are proud to say that we have paid off all our credit cards and have some savings for the first time in years. However, now we want to tackle our biggest debt of all: we want to pay off our mortgage in 10 years. With a $300,000 mortgage it has been hard work trying to stay motivated because it can feel like it's just going to take forever to pay it off. Well, I have a small tip that has helped us get back on track so I would like to share it with others in a similar state of mind. Here it is...we Googled 'extra mortgage repayments calculator' - there are heaps of sites you can use on the Internet. I personally like the one for Suncorp, though we don't bank with them. We worked out that for every extra $10 we put on our regular mortgage repayments each month we take $3300 off our interest. Even better, it takes 3 to 4 months off our loan. Of course it depends on your loan type, interest rate, how much you have owing and if you pay fortnightly of course. It made it easier for us to understand anyway and keeps us feeling good about paying that little bit extra into our mortgage when we go without sometimes. We know we have a choice and aren't really missing out because it will all be worth it in the end. Also, after we have paid it off we are going to treat ourselves to a trip of a lifetime (pre-paid of course)because we deserve it!
- Contributed by Venessa, Ormeau, 2nd June 2009
We have been budgeting for two years now and are proud to say that we have paid off all our credit cards and have some savings for the first time in years. However, now we want to tackle our biggest debt of all: we want to pay off our mortgage in 10 years. With a $300,000 mortgage it has been hard work trying to stay motivated because it can feel like it's just going to take forever to pay it off. Well, I have a small tip that has helped us get back on track so I would like to share it with others in a similar state of mind. Here it is...we Googled 'extra mortgage repayments calculator' - there are heaps of sites you can use on the Internet. I personally like the one for Suncorp, though we don't bank with them. We worked out that for every extra $10 we put on our regular mortgage repayments each month we take $3300 off our interest. Even better, it takes 3 to 4 months off our loan. Of course it depends on your loan type, interest rate, how much you have owing and if you pay fortnightly of course. It made it easier for us to understand anyway and keeps us feeling good about paying that little bit extra into our mortgage when we go without sometimes. We know we have a choice and aren't really missing out because it will all be worth it in the end. Also, after we have paid it off we are going to treat ourselves to a trip of a lifetime (pre-paid of course)because we deserve it!
- Contributed by Venessa, Ormeau, 2nd June 2009
Use the Bank's Customer Service to Your Advantage
It is amazing what spending a little time at the bank can do in decreasing your mortgage. Usually when I go to the bank the teller always asks if they can help with insurance or loans etc as part of their customer service. One day I decided to take them up on their offer. During my free hour appointment they looked at my home loans and investments and were able to suggest ways to reduce the interest paid. They first put us on a package that gave us discounts on the standard interest rates, were able to remove monthly fees and by switching to fortnightly payments could shave 10 years off the life of the loan. They are now looking at our insurance policies to make sure we have the best cover at the best price. All of this is a free service provided by professional financial advisors. I strongly recommend that you check out all your loans, investments and insurances this way annually. It is free and often results in saving you money, time and worry.
- Contributed by Cynthia, Somerville, 22nd April 2009
Editors Note: All banks offer a service like this in the hope that they can make more money from you. If you do take them up on their offer be sure to check all the fine print, ask plenty of questions and get everything they tell you in writing - in other words be really, really sure that you are the one benefitting from the appointment.
- Contributed by Cynthia, Somerville, 22nd April 2009
Editors Note: All banks offer a service like this in the hope that they can make more money from you. If you do take them up on their offer be sure to check all the fine print, ask plenty of questions and get everything they tell you in writing - in other words be really, really sure that you are the one benefitting from the appointment.
Finding a Few Extra Dollars for the Mortgage
Approximate $ Savings: $2000
After deciding we wanted to try to pay some extra off our home loan, we were faced with the fact that we didn't have any extra money around to do it!! We were forced to look at our spending habits and realised we spend a lot of money on things we don't really need so we decided to change that. Every time we went shopping and thought about buying something, we REALLY thought about whether it was necessary, most of the time we didn't think it was! So with the money that we saved by not buying that particular item we then paid that amount off our home loan! As it was money we were thinking of spending anyway i.e. if we were going to purchase and item for $20 but didn't then we pay $20 extra of the home loan we didn't miss it! This obviously require some discipline in making sure you pay the money off your loan. In 6 months we have managed to pay an extra $2000 off our loan and have got less of those useless item lying around!! If we can keep doing this then we will save thousands on interest and repay our house sooner!! Also means my hubby doesn't mind when I go shopping now, 'cos he knows extra is being paid off our loan!!!
- Contributed by Amanda, Blyth, 31st March 2009
After deciding we wanted to try to pay some extra off our home loan, we were faced with the fact that we didn't have any extra money around to do it!! We were forced to look at our spending habits and realised we spend a lot of money on things we don't really need so we decided to change that. Every time we went shopping and thought about buying something, we REALLY thought about whether it was necessary, most of the time we didn't think it was! So with the money that we saved by not buying that particular item we then paid that amount off our home loan! As it was money we were thinking of spending anyway i.e. if we were going to purchase and item for $20 but didn't then we pay $20 extra of the home loan we didn't miss it! This obviously require some discipline in making sure you pay the money off your loan. In 6 months we have managed to pay an extra $2000 off our loan and have got less of those useless item lying around!! If we can keep doing this then we will save thousands on interest and repay our house sooner!! Also means my hubby doesn't mind when I go shopping now, 'cos he knows extra is being paid off our loan!!!
- Contributed by Amanda, Blyth, 31st March 2009
Play the Mortgage Game
If you have access to your Bank online, do as I do. As well as paying extra and paying weekly I have a little game with myself that I need to keep paying the mortgage down to round 100 numbers. For example if the balance is $56 550 I will transfer an extra $50 from my savings account onto the mortgage (if I had an extra $150 that would work as well etc). Sometimes the amount is only $10, sometimes more. This small but often extra increase is really adding up and has helped me to pay off an extra $10000 last year without really trying. It is also an extra motivator to keep funds in your account and not spend them so that you have the extra to pay off. - Contributed by Margaret, Hughesdale, 23rd March 2009
The Reward Stream
Approximate $ Savings: 0.09% off any bank home loan rate
Save money on your home loan for free! When you are taking a home loan you can now get reward points just like you can on credit cards but with no fees and charges. All you have to do is use a broker who has registered for this reward program and you will get free reward points worth real dollars every time you pay your mortgage. No catches or fees and it works with every bank. You will get the same loan you were going to take anyway but you will get free points for it. go to the website at www.therewardsteam.com.au to find participating brokers. They also have the same system for your phones and broadband.
- Contributed by Michelle, Aireys Inlet, 19th November 2008
Website: www.therewardsteam.com.au
Save money on your home loan for free! When you are taking a home loan you can now get reward points just like you can on credit cards but with no fees and charges. All you have to do is use a broker who has registered for this reward program and you will get free reward points worth real dollars every time you pay your mortgage. No catches or fees and it works with every bank. You will get the same loan you were going to take anyway but you will get free points for it. go to the website at www.therewardsteam.com.au to find participating brokers. They also have the same system for your phones and broadband.
- Contributed by Michelle, Aireys Inlet, 19th November 2008
Website: www.therewardsteam.com.au
Using LOC to Bring Home Loan Down
My husband and I have a revolving line of credit which works well for us (most of the time). Lately I've decided to bring the home loan down as quickly as possible. I enrolled in a manual bookkeeping course last September at our local community centre. The course cost $20 but some places may have this for free. I now record every cent spent plus every cent earned. I subtract the spending from the earnings to find out what is left in this months budget as the balance represents an extra amount off my mortgage. We found recently the trick to slashing a revolving line of credit mortgage is to treat the home loan like a standard mortgage and pay a weekly repayment into the loan as well as keeping your wage there until its time to pay the Visa bill. I record this repayment as a payment in my ledger so I know the money stays in the bank. If we spend more than our earnings I record this in red pen and add it to my next months spending as an extra bill to be paid. I've been doing this since September and have managed to cut my home loan by $6 000. And it has reduced my monthly interest bill by $50. The revolving line of credit relies on you keeping your income in the bank and using your credit card. We fell into the trap of relying on the wage kept in the bank to cover the home loan rather than still having a repayment in the bank. I'm amazed at how effective the repayment has been.
- Contributed by Susanne, 17th January 2006
- Contributed by Susanne, 17th January 2006
Benefits of LOC
We have had a LOC mortgage for many years now and love it. You certainly have to be financially disciplined to make it work, and if you are the rewards are there. Our wages go direct into the account thus reducing the interest rate on a daily basis. We also use the credit card for virtually everything and pay it in full each month. The trick is, as with any sound financial plan, to spend less than you earn. I think another good feature of the LOC is if you do need to purchase any large items you are using finance at home loan rates and not personal loan rates. I have never had a personal loan in my life and don't ever intend to have one. I think a lot of people have come unstuck with LOC's because they spend a lot on items that they wouldn't have purchased if they had a regular loan. The LOC is not meant for that. What I also like about if is if you do have an emergency you know that the funds are there.
- Contributed by Lindas, 23rd September 2005
- Contributed by Lindas, 23rd September 2005
Rethinking LOC
I have a fantastic budgeting program that was set up for me by basicbudgeting.com.au I did a course with them at my local TAFE college and the spreadsheet came with the course. I originally did the course because we were struggling to get ahead with our line of credit mortgage. I have given it a year with strict budgeting and am just in the process of changing back to a standard mortgage. The line of credit style counts your savings sitting in your mortgage to reduce it but if your savings are minimal the benefits are reduced. Also the fees and charges involved are a killing: higher interest rates and transaction fees are whipping out all our hard work. That's been my experience, I'd love to hear from people who are making it work.
- Contributed by Kate, 22nd September 2005
- Contributed by Kate, 22nd September 2005
Review Your Home Loan Deal
Every couple of years (or when you fixed term expires) you should check if you getting the best deal on your home loan. Mortgage Brokers (make sure they are a member of the Mortgage Finance Association of Australia and have a licence for your state) are a one stop shop for a number of lenders (ensure they have a comprehensive panel) and can investigate FREE OF CHARGE (lender pays them a commission) your particular circumstances. Make sure before you agree to change though that they can show savings outweigh any possible fees for changing lenders.
- Contributed by Michelle, Birbra Lake, 11th February 2008
- Contributed by Michelle, Birbra Lake, 11th February 2008