Taking out a first home loan? Here are some tips to save you money
Have you found the house you’d like to own? Your next step is getting a home loan and hopefully in a way that allows you to minimise your costs.
You might be surprised by how much you could potentially save over time by being proactive with your home loan selection. After all, a mortgage is a 20-30 year commitment, so saving a few dollars here and there can really make a difference.
Mozo’s banking expert, Peter Marshall and Chief Customer Officer at Tic:Toc, Faith Brockhoff say that cutting down on your home loan costs is certainly possible by choosing the right home loan features to suit your needs.
So here are some tricks to keep your costs low, as determined by the experts:
Interest rates
The lower the home loan interest rate, the less you will pay on your repayments and as a whole over the life of the loan.
“Don’t just settle for the first rate you see or are offered by your existing bank. Spend a bit of time looking at a range of home loan options from a variety of lenders so that you can determine what’ll be the best option for you,” says Marshall.
By doing your research, you could stumble upon an opportunity that’s a good fit for you.
Brockhoff notes that “even a slightly lower interest rate can lead to some serious savings over the long haul.”
To crunch the numbers, try using a home loan comparison calculator to give you an idea of how your top home loan picks stack up against each other.
Repayment frequency
It’s very common for mortgage repayments to be monthly but lenders will generally also offer weekly or fortnightly options.
While being on a monthly repayment plan could be the more financially comfortable option if your salary is paid monthly, weekly or fortnightly payments might actually be better.
“If you have the option, making more repayments towards your home loan can help you pay off your loan quicker,” says Marshall.
Brockhoff says that making more frequent payments could also save you some money on interest. This is because in that set-up a year would consist of 52 weekly payments, which is a lot more than 12 monthly payments.
Home loan fees
The number of fees you pay when you take out a home loan can really start piling up. From the application fees, to ongoing ones, you could be spending more time on your budget spreadsheet than you’d like.
However, there are lenders out there who charge less fees - some even skip them altogether. For example, Brockhoff says that Tic:Toc doesn’t charge fees because it uses technology to automate the traditional home loan process to pass on the savings to customers.
So, it’s definitely possible for home loans to come without fees and keeping a lookout for them might be the way to save hundreds or even thousands of dollars.
“But even finding a home loan with lower fees can still bring you a great amount of savings,” Marshall explains. “And if you are paying fees for certain features that’s ok but just make sure you’re not paying for things that you don’t or won’t ever use.”
Offset accounts
An offset account allows you to link your everyday bank account to your home loan. It’s potentially a handy feature to have as the money deposited into the account acts as a placeholder of sorts, to offset the loan principal and can be a way for you to reduce the interest payable.
Marshall points out that every feature that comes with your home loan has the potential to impact how much money and time you spend paying it off. So it’s important to take your time and familiarise yourself with the different options available to you.
Compare home loans
Not sure which home loan will be best for you? Why not check out the round up of the best home loans our money experts have tracked this month, or you can start comparing your top choices below!
* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.
** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.
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