WITH a bit of inside knowledge, you can shave thousands off your mortgage over the life of your loan.
Home Loans Tip # 1
Add up all the fees when buying
Don't forget to take into account all of the extra fees when you purchase a home, these could include: mortgage insurance, loan application fee, refinancing or switching fees, legal costs, stamp duty, builder's report and a valuation fee.
Home Loans Tip # 2
Additional repayments and the savings
Consider lump sum payments when you can or commit to an amount each month. When rates fall maintain old repayment levels to reduce the principal. On a $300,000 home loan with a rate of 8.9% over 30 years a $10 per month extra repayment will save you nearly $14,000 in interest off the life of the loan.
Home Loans Tip # 3
Professional package discounts
Don't be afraid to ask for a discount from banks and lenders if you earn more than $50,000 a year, or have a combined income of $80,000. Discounts of 0.5 per cent or more are generally available.
Home Loans Tip # 4
The pitfalls of 'honeymoon' intro rates
Home lenders offer attractive low introductory rates to entice home owners to take them out. They have a limited period usually 12 months before automatically reverting to the standard rate offered by that lender. So take advantage of these discounted rates but also look at the features and flexibility on offer when choosing a loan.
Home Loans Tip # 5
Attractive when rates are rising but generally they have less flexibility than variable-rate loans. Additional payments may not be permitted and be very careful with high exit penalty charges.
Home Loans Tip # 6
Can't get a standard loan?
If you're self employed, have poor credit or are newly arrived in this country a number of non-bank lenders offer loans to help you. The rates are generally higher but do come down after a few years of on-time repayments.
Home Loans Tip # 7
Check for ongoing fees
When comparing different home loans, look at the 'total cost of borrowing' which includes the monthly or annual administration fees.
Home Loans Tip # 8
Check your statements regularly
We all make mistakes (even Banks), simple mistakes like an incorrect balance or the calculation of the wrong interest rate can be extremely costly.
Home Loans Tip # 9
Compare home loan features and not just the rate
Always compare home loans with similar features when finding the best rates. No point in comparing a basic home loan that has limited features with a variable loan that allows you to draw against repayments or offset savings against the mortgage. Invariably the flexibility costs you.
Home Loans Tip # 10
Consider a portable loan
A portable home loan that allows you to sell one property and move to a new one without having to refinance will save you application and legal fees. The loan amount required should be no greater than the existing amount borrowed.
Home Loans Tip # 11
Do your homework
Spend the time to look at all the different home loans on ratesonline and familiarise yourself with all the special features available in the market. Don't just look at the big banks as some of the smaller lenders offer better features or lower fees that may suit your needs better.
Home Loans Tip # 12
Look for flexibility
Always look for flexibility in a home loan as over the life of that loan you will undoubtedly experience changing circumstances.
Home Loans Tip # 13
Repay your home loan fortnightly
With interest calculated daily, the more frequent the repayment the less interest you are charged.
Home Loans Tip # 14
Save with a line-of-credit home loan
By allowing your income to be paid into your loan account directly you reduce the outstanding balance immediately. Withdrawing only the money you need to live on helps pay the loan off much quicker and saves thousands in interest. It requires a discipline to not withdraw more money than is going in and income must exceed expenses by the value of your principal-and-interest loan repayment otherwise the financial benefit is limited.
Home Loans Tip # 15
Use equity that you have built up to borrow
Equity is the value of your assets minus the debt. It is possible to borrow against this equity to invest in a second property, shares etc. The major advantage of this is by borrowing against this equity rather than taking out another type of loan the rate will be lower.
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