Mortgage repayments are one the biggest expenses in a household each month. If you have a mortgage worth $350,000, you will be paying about $2,580 each month. If your home loan is payable in 25 years, the interest you’ll be paying is $425,000.
Luckily, there are a few ways for you to manage your mortgage so that you can lower the amount of interest you’ll pay, as well as the term of the overall loan.
Safeguards
Even if you can afford your mortgage, any way you can reduce your repayments is a welcome respite. If you can increase your repayments, even if it is just by a little amount beyond the minimum, it will help to lower the amount of the principal loan, which means that the term and interest paid for the duration of your loan will go down.
Here’s a few extra tips to help you get started:
- Split your monthly payment into two. This is a proven strategy that helps save plenty of cash for mortgage holders. Instead of paying monthly, split this in half and pay them every fortnight. For example, if you are paying $3,000 each month, pay $1,500 every fortnight. The calculation behind this theory is simple: there are 12 months in a year, so you will pay $36,000 off your loan annually. However, there are 26 fortnights in a year, so multiply that by $1,500 and you pay $39,000 off your home loan.
- Round up the amount. If you have a home loan worth $350,000, payable within 30 years at 7% interest, your monthly repayment amounts to $2,329. If you round it up to $2,500 each month, you’ll be able to repay the loan earlier—by around four years. Likewise, you’ll have more than $69,000 slashed from the interest you owe.
- Have an offset account. This works like a savings account that will reduce the accumulated interest on the amount of loan significantly. If you have deposited $5,000 as the full offset account on a $350,000 home loan since day one, your repayment term will be reduced by about 14 months. Around $34,000 will be taken off from the interest, which is a very significant amount as well.
- Work with an experienced mortgage broker. Be sure to review your home loan to see if all the features that require the premium payment are needed. Have an experienced mortgage broker do a home loan health check for you to determine if you can have a better deal from your current lender or you need to talk with another one.
Every bit of savings counts these days. If you can save plenty from your home mortgage interest payments, it will be to your great advantage.