For many Australians, home loan repayments take up a large portion of their monthly budget. With high property prices being the norm across most of the country, repayments tend to be expensive. That’s why finding ways to reduce the cost of your home loan repayments is crucial.
Reducing how much interest you pay on your home loan is one of the best ways to reduce the size of your monthly repayments. In this article, we’ve compiled six ways to pay less home loan interest and trim down your monthly repayments.
Negotiate a Lower Interest Rate
An obvious way to reduce your mortgage repayments is to get a lower interest rate. If you know your lender has lower rates on offer, ask them to match your rate to the lower rate new customers are offered. If you’re a responsible borrower, your request may be granted. Don’t like negotiating? Talk to us and have your Broker Kit mortgage broker do it for you.
Refinance with a New Lender
If your current lender won’t lower your interest rate, consider refinancing with another lender. At Broker Kit, we will help you research to find lenders offering lower interest rates and weigh up the costs associated with refinancing. Besides reducing interest rates, refinancing can also help consolidate debt, switch from a variable to fixed interest rate or vice versa, and tap into home equity.
Open an Offset Account
An offset account is a bank account linked to your home loan balance that offsets your home loan amount. The money in this account reduces the amount of interest you owe, so long as you keep money in your offset account. Most offset accounts charge a monthly or annual fee, so ensure your interest savings outweigh the cost. Your Broker Kit broker will help with the calculations.
Make Extra Repayments
Making extra repayments on your home loan will pay off your loan faster and save on interest over its life. Extra repayments reduce the amount of interest owed, so your interest repayments will shrink over time. Fixed rate borrowers are generally limited in their ability to make extra repayments, so it’s important to check your home loan terms.
Switch to Interest-Only Repayments
Making only interest repayments will reduce your monthly repayment amount. However, it can be risky, and you’ll need to make higher repayments once your interest-only period ends. Interest-only repayments are suitable for experienced property investors who can use them strategically with tax benefits.
Find a Low-Fee Home Loan
Some lenders charge monthly or annual service fees, application, or loan establishment fees, while others don’t. If you think you’re paying too much in fees, talk to your Broker Kit broker to see if there’s a home loan with fewer or lower fees. Remember that some lenders may charge higher interest rates to make up for the lack of fees.
If you’re considering refinancing, speak to a financial advisor or mortgage broker to figure out if you can lower your mortgage repayments. Contact your local Broker Kit broker for more information about your refinancing options.