Fast-track your mortgage

The best way to own your home sooner is to get a cheap loan and make higher payments, more often.
 
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02.Four ways to save

1. Make bigger repayments

Increasing how much you pay, particularly in the early years, can have massive long-term benefits. Many bank and lender websites have calculators that approximate the effects of changing your repayments. Plug in your loan and payment details to see what difference a change could make, or ask your lender to crunch the numbers for you.

Example: Georgina has a $400,000 variable loan, with a rate of 8.5%. The loan has twenty five years left to run at her present repayment levels (the minimum fortnightly repayment). Adding $100 per fortnight to the minimum fortnightly repayment would cut four and a half years and over $119,000 in interest off Georgina’s loan.

2. Turn pro

Depending on the amount you’ve borrowed (or sometimes your salary or line of work), you may be eligible for a low-rate ‘professional package’. They can include fee-free transaction or credit card accounts, discount insurance, financial advice and other ‘relationship’ benefits. Interest can be around 0.7% lower than standard rates.

3. Pay fortnightly

This is really just a way to make yourself pay more to your lender each year, thereby cutting interest and years off your loan. By paying every two weeks you’ll make the equivalent of an extra month’s repayment each year (as each year has 26 fortnights)

Trap: fees can be around $300 per year so ask your lender to show you how long it’ll take for interest savings to cover the annual fee. Will you end up paying more for the add-on services than if you’d shopped around for them separately?

4. Ditch the bells and whistles

Interest rates on basic mortgages are often lower than rates on standard (premium) and equity (line of credit) loans. If you need the additional features that premium mortgages provide, great, but if all you need is a ‘no frills’ loan, why pay extra?

Example: George had been paying around 0.5% more than his lender’s basic rate to have the flexibility to fix a portion of his loan some time in the future. “I had no intention of using the fixed rate option, so when I realised I was paying 0.5% more for it I switched to the lender’s ‘plain and simple’ loan,” he says.

Extra repayments calculator

Extra loan repayments
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