Tip 1: Get a cheaper interest rate
Probably the single biggest opportunity to reduce your mortgage is to find a cheap interest rate from the start. Shop around with both major banks and other secured lenders such as credit unions and building societies. Remember, the benefits of a cheap interest rate may be nullified if you are saddled with high fees and an inflexible product. So do your homework and find out which mortgage product offers a cheap interest rate with lower fees and a combination of home loan features that you need – your mortgage broker can help you with this.
Tip 2: Make more frequent repayments
Where interest is calculated on a daily basis, making payments on a more frequent basis whether fortnightly or weekly serves to cut down on the interest payments on your mortgage.
This means that you’ll be making 13 monthly repayments each year – reducing the principal and term of your loan.
Tip 3: Don’t lower repayments if interest rates drop
Your minimum mortgage repayments will usually fall if interest rates drop. Rather than reducing your payments at this stage, maintain your previous payment levels.
This particular method has an added benefit in that you will hardly notice the difference since you would already be used to making payments in that amount.
Tip 4: Match your fixed rate to your intended period of stay
If you intend to live in a property or sell it after a specific period, it makes sense to match your fixed home loan rate to this timeframe. So if you intend to keep a property for five years, avoid getting a 10 year fixed interest rate.
Tip 5: Make your home loan portable
Most people don’t live in the same property for 30 years or more, that is why home loan portability is an essential feature. This allows you to sell one home and buy another without having to reset the loan – saving you the cost of set-up and exit fees.