How to save thousands and shave years off your home loan plus more handy hints.
Tip 1 - Pay off your mortgage as quickly as you can
Tip 2 - The way you make repayments
Tip 3 - Deposit any spare cash into your loan
Tip 4 - have your income paid directly into your home loan
Tip 5 - Pay your first home loan instalment as soon as you settle
Tip 6 - Align your loan repayments with your income cycle
Tip 7 - Don't lower your minimum regular repayment if interest rates fall
Tip 8 - Use an offset account to knock years off your home loan
Tip 9 - Use Internet Banking* for low-maintenance, low-cost loan management
Tip 10 - Protect yourself against rising interest rates
Tip 11 - Pay more off on your loan to build up equity
Tip 12 - Get the right home loan for you
Tip 1 - Pay off your mortgage as quickly as you can
One of the best ways to save money on your mortgage is to pay it off as fast as you can. The longer you take paying off the principal loan the more interest you pay along the way, and the higher the overall cost of the loan. So ask your Suncorp lending specialist to help you design a plan to pay off your home loan sooner.
Tip 2 - The way you make repayments may be more important than you think
Most people concentrate on the interest rate when they're trying to save money and time on their home loan. Ultimately, it's the way you attack your repayments that has the biggest effect on the overall term and cost of your loan. Although a lower interest rate certainly helps along the way, rates will inevitably move up and down a lot over 25 years.
- Make sure interest on your home loan is calculated daily. It's important that any principal repayments you make have an immediate reducing effect on your next interest repayment. So don't accept a home loan that calculates interest on an average monthly balance.
- If your loan has the flexibility to allow increased regular repayments and lump sum repayments without penalty, take advantage of it whenever you can.
- If you can, temporarily park extra funds in your home loan, using an offset account, to reduce your principal, which has the effect of reducing the interest component of your next instalment (see tip 8).
- Make more frequent repayments. Arrange a fortnightly repayment or a weekly repayment. In both cases, you'll actually be making the equivalent of 13 monthly repayments each year, saving you money by reducing the principal and term of your loan.
Tip 3 - Deposit any spare cash into your loan as soon as you can
Extra repayments at any time help reduce the time and cost of a loan. But for maximum time and cost savings, you should make extra repayments earlier, rather than later - thanks to the powerful effect of compounding interest over time.
When a repayment is due, every extra dollar paid will reduce the principal and therefore the interest payable next repayment. That saving then compounds, making an enormous impact over the life of the loan. So an extra dollar here and there now, could save you thousands in the future.
And features like a redraw facility can give you the added flexibility of being able to access any extra repayments when you need it. Ask a Suncorp lending specialist if your loan has this functionality available and how to use it.
Tip 4 - Have your income paid directly into your home loan and manage your day-to-day expenses on a credit card with an interest-free period
Provided you are careful to keep track of your expenses, this may be one of the best ways to use your existing financial resources to reduce the cost of your loan. Linking income and expenses to your home loan puts you in control of your finances, and allows you to keep as much money as possible on your loan for longer - where it can work to reduce both the term of the loan and the interest.
Tip 5- Pay your first home loan instalment as soon as you settle
You'll immediately reduce the principal, and therefore all future interest repayments too, putting you ahead instantly. Your first monthly home loan repayment is not due until a month after settlement of your loan. By making this repayment on day one of your loan at settlement, you can immediately put yourself ahead of the payment cycle and save money at the same time.
Tip 6 - Align your loan repayments with your income cycle
This allows you to keep as much money as possible on your loan at all times. Leaving extra money in your loan for just a few days each month can have a substantial effect on the interest you pay and the overall term of your loan.
Set up your repayment periods with the same regularity as you get paid. So, if you get paid fortnightly, make fortnightly repayments on your home loan. By structuring repayments this way, you will always be in a position to maximise the amount of money paid against your home loan. All Suncorp home loans come with the option of weekly, fortnightly or monthly repayment periods.
Tip 7 - If your minimum regular home loan repayment drops because interest rate fall, don't lower your repayment
Take advantage of it by trying to maintain the old level of repayment. You'll pay off your loan a lot sooner and save yourself a bundle in the meantime. Using this strategy, you're effectively making regular extra repayments, because you're paying more than the minimum monthly requirements each month. But because you're used to paying this amount already, you won't even notice.
Tip 8 - Use offset account to knock years off your home loan
A Standard Variable Rate Home Loan comes with the option of a 100% Home Loan Offset Facility - a feature of the *Everyday Options Account. This facility enables you to use your income and savings to reduce your loan interest. A Mortgage Offset Fee applies to set up the 100% Home Loan Offset Facility charged to the Loan Account to be linked. You can have up to three Everyday Options sub-accounts with the combined account balances used to offset the loan balance.
*The Everyday Options account is issued by Suncorp-Metway Ltd ABN 66 010 831 722. Please read the relevant Product Disclosure Statement before you make any decisions regarding any of these products. Contact us for a copy.
Tip 9 - Use Internet Banking* as a low-maintenance and low-cost way to manage your home loan
It's convenient and gives you instant access to your loan details. Suncorp's Internet banking* facility is one of the best around. As a home loan customer, you can set up and change automatic repayments, make immediate transfers and future-dated transactions, as well as view and download your loan transaction history and check on how far your payments are in advance.
Tip 10 - Protect yourself against rising interest rates
Sometimes it's not easy to predict when and how much interest rates are going to fluctuate, especially in a volatile market. But by splitting your loan - part variable, part fixed - you can prepare for and protect yourself against rate rises. Talk to a Suncorp lending specialist about the best split for your situation.
Tip 11- The more you pay off your home loan, the more of the property you own, and the more equity you build up
You can borrow against this equity for further investment, eg. a second property, shares, etc. Using a home loan product like Suncorp's Asset Line is the perfect way to turn the equity you've built up in your home into wealth. It gives you complete control of your loan with no minimum monthly repayments and immediate access to your money for any purpose you like.
Tip 12 - Get the right home loan for you
Most importantly, you need to have the right home loan to take advantage of these tips. As you can see, you really can save thousands of dollars over the life of your loan. So take the first step today and talk to a Suncorp lending specialist about doing a health check on your home loan.
Product Information Document
Banking Products are issued by Suncorp-Metway Ltd ABN 66 010 831 722. Please read the relevant Product Information Documents before you make any decisions regarding any of these products. Contact us for a copy.
