4 Ways to Save Money on Your Mortgage Repayments

With interest rates rising and the cost of living surging, everyone is looking for ways to save money. If you have a variable rate home loan, chances are your mortgage repayments have increased multiple times over the last few months and you’re trying to cut costs. And if you’re one of the lucky ones who fixed your home loan when rates were low, there’s still no harm in preparing for when your fixed-rate period ends. So, if you’ve been wondering ‘how can I reduce my monthly repayments?’ then read on for a few ideas to help you save money on your home loan.

1. Ask your lender for a lower rate

It sounds easy, and it is. You can simply contact your lender and ask for a reduced interest rate. As with most things in life, if you don’t ask, you won’t receive. However, it pays to be prepared. Be sure to compare your lender’s rates with others on the market and check if your existing lender is offering new customers a lower rate. If competitor interest rates are lower than yours, or your lender is offering new customers a lower rate than what you’re on, you can use this information to politely bargain and assertively request an interest rate reduction.

Also be mindful that lenders will usually take a few things into consideration before making their decision. For instance, they may look at your credit history, employment status, loan to value ratio (LVR) and whether you are an owner-occupier. Being an owner-occupier with a good credit score, ongoing employment, and an LVR of 80% or less will likely increase your chances of being offered a lower rate.

2. Ask your broker to submit a home loan review or repricing request on your behalf

Did you know that your mortgage broker can ask your lender for a lower rate on your behalf? That’s right, your broker can lodge what’s called a ‘repricing’ or a ‘home loan review’ request for you, to check if your lender can offer you a more competitive rate. Usually, it’s just as simple as your broker filling out a home loan review request form and sending it to your lender. Your lender will then respond, hopefully with a discounted rate for you to consider, or their home loan review may even include a property valuation so that they can ascertain if the property has increased in value. If it has, and your loan amount has reduced over time, you may fall into a lower LVR bracket, which could result in a better pricing opportunity.

3. Assess your refinancing options

Another way borrowers may be able to reduce their monthly repayments is through refinancing. Refinancing means changing home loans, usually with the aim of locking in a more competitive interest rate. Your mortgage broker can compare the interest rate, fees and features of your current home loan with others on the market to work out if there’s a different loan product out there that can save you money or better suits your needs. The benefit of working with a mortgage broker as opposed to going directly to a lender is that a mortgage broker can look at loan options from a wide variety of lenders to try and find you the most competitive deal, whereas a lender can only offer the loan products from their own institution. However, before refinancing, be sure to consider any fees you may be charged throughout the refinancing process, such as loan establishment fees, discharge fees, application fees, registration fees, valuation fees and settlement/legal fees. It’s important to ensure that any savings you’re going to enjoy as a result of refinancing outweigh any fees incurred, and that you have thought about the loan product as a whole, rather than just the interest rate or cashback offer.

4. Utilise an offset account

Some loan products (usually variable rate home loans) include offset accounts. An offset account is like a standard savings account, except it’s linked to your home loan. So when your lender charges interest on the amount owing on your home loan, if you have an offset account they’ll take into consideration any savings in your offset account, and only charge interest on your home loan balance minus the amount in your offset account. So, the more money you have in your offset account, the less interest you’ll have to pay. So it’s worth chatting to your broker about whether your current loan product includes an offset account and whether utilising it is the right option for you.

If you’d like more information on how you might be able to lower your mortgage repayments, please contact Sean from MoneyQuest Croydon on 0467 007 300.

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