Three home loan tips
Whether you’re buying a new home, refinancing from another bank or investing in property, the team at St.George understand that your home loan is most likely the biggest investment you will make in your life.
Phil Soper, St.George Business Development Manager in QLD has some helpful tips for REIQ members to get the most out of your home loans.
Tip 1: Utilise an interest offset account
Interest offset facilities can make your savings work harder, by ‘offsetting’ them against your home loan. This will give you the flexibility of accessing your money when you need to, with the benefit of paying off your home loan sooner. With an interest offset facility you pay interest only on the net amount (your loan balance less your transaction account balance for that day). Not all offset accounts offer 100 per cent offset facility.
For example if your home loan balance is $350,000 on a particular day and your linked savings account balance is $50,000 on that day, as interest is calculated daily you only pay interest on $300,000 for the day. You will not earn interest on the $50,000 in your offset account; instead the $50,000 is offsetting the interest charged on your home loan. As your offset account is reducing the interest charged on your home loan, but your standard repayments remain the same (reflecting the loan balance of $350,000), more money will be attributed to the principal and will in affect help you own your home sooner.
Tip 2: Make additional repayments
Making additional repayments above your minimum required repayment is a direct reduction in the balance of the loan. This will not only reduce the interest payable but also reduce the remaining term of your mortgage. For example making an additional repayment of $100 per fortnight on a $350,000 mortgage over 25 years could save you approximately $40,087.83 in interest and reduce the loan term by up to six years. Any additional repayments will benefit even lump sum payments, like a tax refund or windfall, will assist in reducing the loan term.
Tip 3: Ask questions and take advantage
There are other opportunities to save money which can be put towards your mortgage. In conjunction with a good household budget you could save money by taking advantage of other products that the bank offers, as these products may include a discount as part of holding a St.George home loan. You should regularly review the amount you pay on household costs such as home and contents insurance, car insurance, life insurance, etc.
If taking advantage of the bank’s products could save you money and the products are right
for you, any savings could be allocated to the mortgage, in turn reducing the balance.