11. Switch to a lender with a lower rate
It may sound like a simple idea but switching out of your current loan and taking out a loan at a lower rate can mean the difference of years and thousands of dollars. If you have a loan that is tricked up with all the features, or even if you have a standard variable loan, you might find that you could get a no frills rate that is as much as a percentage point cheaper than your current loan.
However, before you jump the gun, check out what it will cost you to switch loans. For example, there may be exit fees payable on your old loan and establishment fees and stamp duty on your new loan. Work it all out and if it makes sense, go for it.
12. Forgo those minor luxuries
This is the bit you don’t want to read. Once you have a mortgage, your life is likely to be luxury-free (or at least pretty close it it). Think of all the weight you will lose by giving up your favorite indulgent snack. For the sake of your health you should quit smoking and drink less anyway. Take your lunch from home and save on bad fast food. Trust me, your body will thank you for it.
If you’re stil not convinced consider the fol owing example. A typical day ay include a pack of smokes ($10), a coffee and donut ($5), lunch ($12) and a couple of beers after work ($8). That’s $35 a day or $175 a week or $750 a month or $9,100 a year. Assuming a mortgage of $300,000 at 7.07 percent over 25 years, by making $750 in extra repayments each month, you’d save more than $175,000 in interest and be mortgage free 11 and a half years sooner.
No one is saying you should live a convict existence but just cutting down a little on your expenses will see you reap future financial benefits.
13. Stay informed – don’t forget about your mortgage
With any long-term commitment, there is always the temptation to let your mortgage rol along, make your repayments as they fal due and think as little about it as possible. As long as you keep up the repayments, there’s not much else you need to do, right? This attitude can be a mistake. Keep yourself up to date with what’s happening in the marketplace. You might find that there’s an opportunity to put yourself well ahead of the game. Rates change, new products and changes in the market itself may allow you to seize an opportunity or negotiate a better deal.
Stay informed and stay ahead of the game.
14. Get a cheap rate and invest the difference
When interest rates are low, like now, it is usual y safe to say that inflation is also low. Thus, bricks and mortar may not be the best place to invest. Try getting the cheapest home loan you can find and make the minimum repayment. This allows you to use the extra cash to invest in other, more profitable areas.
You may find that the return you get on shares or some other type of investment means that you have creates a nice little nest egg which you can use to pay off a bigger chunk of your home loan than you might otherwise have been able to do. But beware – high returns often mean high risks. Before undertaking any investment, invest in a consultation with a qualified financial adviser.
Instead of earning interest, any money you have in your offset account works to offset the interest you are paying on your home loan. For example you may have a mortgage of
$300,000 at 7.07 percent and an offset account with $50,000 in it earning 3 percent. This means that $250,000 of your loan is accruing interest at 7.07 percent but the rest is accruing interest at just over 4 percent (7.07 percent on your loan less the 3 percent the
$50,000 in your offset account is earning). Imaging home much you can save!
Of course the best sort of offset account pays the same rate as your loan (100 percent offset).
16. Pay all your mortgage fees and charges up front
Some lenders al ow you to add the amount you borrow instead of coming up with cash for your upfront costs. While this can seem a blessing try to avoid doing this. Consider the fol owing example:
Borrower A borrows $300,000 over 25 years at 7.07 percent. Her upfront costs are $1,000 but she has enough cash to make sure she can cover these. Her total repayment over 25 years will be $640,126.
Borrower B takes out the same loan but doesn’t have enough cash to cover the upfront costs. So he borrows $301,000, at the same rate. Her total repayment over 25 years wil be $642,215. Two thousand odd-dol ars might not sound like a huge amount but what could you buy with it if it stayed in your pocket?
17. Pay your first installment before it’s due
With most new loans, the first installment may not become due for a month after settlement. If you can manage it (and your lender will let you), pay the first installment in the settlement date. If you do this, you wil be one step ahead of the lender for the term of your loan. Every little bit counts.
18. Shop around and make sure your lender knows it
One of the most powerful tools you can have in the search for the best home loan is information. Make sure you have rung half a dozen lenders and brokers (as well done some internet research) before you start talking to your preferred lender about getting a new loan or refinancing your existing loan.
Make sure you know what rates and features are offered by each of your lender’s competitors on comparable products. Be ready to tell the lender what you are looking for and don’t be afraid to ask for extras. If they want your business, and you know what you are talking about, they may be prepared to work that little bit harder to get your business. Don’t be afraid to walk out if you aren’t getting the best possible deal you can.
19. Make sure your loan is portable
If there is any chance that you wil move house during the course of your loan (and let’s face it, there is a strong chance), make sure that your lender will allow you to transfer your loan to a new property and that it won’t charge you the earth for the privilege. Be careful. If you sell up and buy a new house, you could find yourself down thousands in discharge costs on your old loan and establishment fees on your new one.
20. Avoid bringing finance
Someone once said bringing finance is so called because it al ows you to “pylon” the debt. The joke’s appalling, but so is bringing the finance. Unless you get your timing right you could find yourself with two home loans at the same time – with the bringing finance element costing you an extra couple of percent premium on the standard variable rate. Consider using a deposit bond or sel ing before you buy, as it wil be much more cost effective for you than another loan.
21. Choose the loan that suits your needs
Choosing a loan is about knowing what you want. Draw up a table of potential home loans and rank them. Make a list of al the features that are important to you and rank them according to importance. Give each feature a score out of 5 – one for unimportant right through 5 for indispensable.
Use this technique for ranking the loans on offer and pretty soon you’l see the one that’s right for you. Remember, different loans have different purposes so you need to match a loan to your need. Remember, different loans have different purposes so you need to match a loan to your need. Taking out an interest only loan suitable for investors if you are planning to live in the house is just foolish.
Ditching the features you don’t need can save you up to 1 percent on the interest rate of your loan. Over 25 years that’s a whole lot of money you’ve just saved yourself.
22. Don’t be afraid of smaller lenders with cheap rates
Since the advent of the mortgage managers over the past five or six years there’s been a lot of talk about smaller and “non-traditional lenders” and how they have forced interest rates down. With the property boom, plenty of opportunities sprang up for smart lenders with low fees willing to take on traditional lenders and many have done very well indeed. Some borrowers worry about what might happen if their lenders get into financial trouble. Keep in mind that you’ve got their money – so don’t worry too much. There are some smal er lenders whose names might not be readily familiar but whose rates might be enough reason to get in touch.
23. Find out if your profession will get you a discount
Some lenders offer discounts to specific professional groups or members of professional organizations. Ask your lender if your occupation qualifies you for any discount. You might be pleasantly surprised.
24. Read all about it
Information is your greatest weapon against the mortgage monkey, which has taken up (or is about to take up), residence on your back. By staying informed about what is going on in the home loan market, you might be able to stay a step or two ahead of your lender. And if you can stay one step ahead, you are already on your way to paying of your mortgage faster.
If You Want the part 01 You can Reach it by Clicking HERE.
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