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6 tips to make your home loan work harder for you

By Mo Zeitouneh

Owning a home is a dream come true for many people, but the journey to homeownership can be a long and often expensive one.

Speaking with a CommBank expert, we explore how to reapproach your home loan to ensure you’re getting the best loan for your personal circumstances.

Most homeowners take out a home loan to finance their purchase, which means they’ll be making regular payments on their loan for many years to come.

There are plenty of ways to get more out of your home loan and pay it off sooner. Picture: Getty

However, there are plenty of ways to make your home loan work harder for you. Commonwealth Bank’s Executive General Manager, Home Buying, Dr Michael Baumann, says there are numerous ways to get the most out of your home loan.

“When looking for a home loan, be sure to do your due diligence and weigh up all the factors, rather than just comparing interest rates,” he says.

Here are his 6 top tips to help you save on interest and become debt-free, sooner.

1. Pay more than the minimum amount

If your budget allows, a great way to pay off your home loan faster is to increase your payments.

Even an increase of $50 or $100 per month can have a significant impact on the life of your loan.

By paying more than the minimum amount required, you’ll reduce the overall interest you’ll pay and shorten the life of the loan.

Using a repayment calculator can help you understand the impact of different repayment amounts and interest rates on your home loan.

By playing around with the numbers, you can see how much you’ll save in interest and how much faster you’ll pay off your loan by making extra repayments or increasing your regular payments.

2. Make fortnightly payments

Paying your home loan fortnightly instead of monthly can offer several benefits, because by paying your home loan fortnightly, you’re effectively making one extra payment per year.

This means you’ll pay off your home loan faster and reduce the total amount of interest you’ll pay over the life of the loan.

Paying your home loan fortnightly could save your thousands over the life of the loan. Picture: Getty

You could even align your repayments to the day after your pay cycle, which means your biggest asset is taken care of first, allowing you to better manage your other bills and every day expenses.

3. Refinance your loan

With significant interest rate rises over the last 12 months, it might be worth shopping around to see if you can refinance to a better rate. This can help you save money on interest and reduce the life of the loan.

But before signing on the dotted line to a new home loan, Dr Michael Baumann says it’s a good idea to calculate if there will be any extra interest paid due to an extended loan term.

“Make sure you also take into account any upfront fees or costs associated with refinancing, including settlement fees, loan establishment fees, mortgage registration fees as well as the new home loan interest rate,” he says.

4. Use an offset account

Michael says another way of making your mortgage work harder for you is by being clear on what you want from your loan, such as an offset account to reduce the interest charged.

An offset account is an account that can be linked to certain types of home loans. Check with your lender which home loans are eligible.

For example, if you have a home loan of $500,000 and an offset account with $50,000 in savings, you’ll only be charged interest on $450,000. By using an offset account, you can effectively reduce the interest charged on your home loan and pay it off faster.

And since CommBank allow you to have multiple offset accounts that can act like buckets, this provides a way to manage your money and all offset against the interest paid on your loan.

5. Review your loan regularly

Your home loan is not something you should set and forget.

Like your health insurance or energy providers, make sure to review your home loan regularly to ensure it still meets your needs.

You may find that your financial situation has changed, that there are different loan options available or that there are additional features you would like to access.

You should review your loan regularly to make sure you’re getting the most out of it. Picture: Getty

Michael says some people may find value in being able to split their home loan so that a portion of the rate is fixed, making it simpler for them to manage their finances, while “having the flexibility to make extra repayments” might be important for others.

6. Speak to your bank

In banking, like in life, communication is key to a healthy relationship, which means you don’t always have to break up with your bank to get the most out of your home loan.

“Make sure you speak with your current lender before switching,” he says.

“A review of a customer’s circumstances may help with a new structure or better deal, without the hassle of switching banks or losing flexible CommBank loan features that you value, like the ability to be able to pause loan repayments if you’re ahead.

“At CommBank, we’re always available to talk with our customers and ensure they are getting the most out of their home loan.”


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