31/01/2023
Start 2023 the productive way by setting some home loan goals. We’ve come up with 10 resolutions to help you get a better handle on your mortgage.
For some, it might be about kickstarting their fitness journey to feel their best. For others, it may be about building better savings habits.
If you’re a homeowner and are paying off a home loan, one of your New Year’s resolutions might be to find ways to save on your mortgage. If that’s the case, we’ve got just the list for you.
Here are 10 ways you can potentially save money on your home loan for the year ahead.
1. Make sure your current home loan is still competitive and suitable. The start of the New Year is the perfect opportunity to evaluate your existing home loan to determine whether it's a good deal and suits your current needs.
With interest rates having risen substantially over 2022, you may not be able to get a much lower interest rate, but it’s still worth doing some research.
Compare your home loan interest rate to the interest rate your lender is offering new customers. It’s also a good idea to see what rates other lenders are offering.
I can help you refinance or negotiate a better interest rate if you’re able to find a better deal.
FIND A BETTER DEAL
Don’t forget to reflect on whether your current home loan still suits your personal and financial circumstances. For example, if you’re earning more money than you were when you first settled the loan, perhaps you might like to consider adjusting your loan repayment amount to pay off your mortgage faster.
If you’ve used Lendi before to get a home loan or refinance, I will regularly check in with you to let you know when you could be eligible for a better deal. This is known as Lendi's Home Health Check™ service and means that you are supported by me – even after you’ve settled your home loan.
2. Review your home and contents insurance
Being well-insured is important for all homeowners. Your home is likely your most expensive asset, so you want to make sure you have strong home and contents insurance.
Different providers offer different levels of coverage, so it’s a good idea to take some time in the New Year to work out whether your cover is still strong.
Typically, most home and contents insurance covers your house and belongings in the event of loss or damage due to things like theft, storms and fire.
Home insurance generally also covers other structures on your property, like fencing, sheds and your swimming pool, in addition to the house itself.
3. Make extra home loan repayments where possible. The faster you pay off your mortgage, the less interest you’ll pay. While you can just pay the minimum monthly repayment amount, it’s not a bad idea to consider making additional repayments if possible.
If it’s within your budget to put a little bit more money towards paying down your home loan balance, it could be worth doing. You’ll move one step closer to owning your home outright and being mortgage-free.
Most variable rate borrowers can make unlimited extra repayments but fixed rate borrowers should check the terms of their loan contract.
Many lenders don’t allow unlimited extra repayments on fixed rate home loans and may penalise borrowers for making too many additional repayments by charging break fees.
Remember to be financially responsible and not pay off more than you can afford.
While you may be able to tap into your extra repayments through a redraw facility, it’s still important to make sure you have a solid emergency fund and savings set aside.
4. Check that you’re not overpaying on your mortgage. Your home loan is going to be expensive, but that doesn’t mean that there aren’t ways to save. Here are some ways to check that you’re not overpaying on your home loan:
Seriously consider refinancing at least once every 2 years
Keep an eye out for the interest rates other lenders are offering
Make sure you’re not paying for features you’re not using (e.g. an offset account that you don’t use but pay an annual fee for)
Make sure you aren’t paying too many fees, especially now that many lenders are offering low-fee home loans.
5. Assess your landlord insurance if you’re an investor. If you own an investment property, it’s a good idea to take out landlord insurance. Landlord insurance can help investors mitigate some of the risks that come with renting out a property.
While there are different levels of coverage, most forms of landlord insurance cover investors in the event of:
A loss in rental income
Theft of the property
Damage to the property.
A good comprehensive landlord insurance policy will likely provide tenancy cover, building cover and contents cover.
So, take the New Year to review your insurance and make sure you know what it does and doesn’t cover. You can also do some research and find out if what you’re currently paying for insurance is fair and competitive.
6. Consider making those investment dreams a reality
New Year, new investment property?
2023 could be the year you finally make your property investment aspirations a reality. While it is a major step to take, it could be a step towards generating passive income or owning an asset that will accumulate capital growth.
Buying a property is expensive but if you have enough equity in an existing property, you may be able to avoid needing to save up a deposit.
Take the time to learn about how property investment works and the kinds of home loans you could be eligible for. Read our Investing 101 Guide to get an insight into how to start your investment journey.
Remember that investment home loans usually attract higher interest rates but investment properties often come with a lot of tax write-offs.
If you want to find out what investment home loans are out there, contact me and we can make an appointment for a chat.
7. Get your debt in check. Start 2023 out on the right foot by devising a plan to pay down your debt as much as possible. Here are some suggestions:
Pay off your credit cards
Lower your credit card limit or cancel your credit cards altogether
Direct your attention towards paying off high interest debts (e.g. personal loans and car loans)
If you can comfortably afford to, consider increasing your home loan repayments or make extra repayments.
Debt consolidation is another option to consider as it can make your debt more manageable and less overwhelming. Roll your credit card, car or personal loans into your home loan.
Debt consolidation merges various debts within your home loan. So, you’ll only make one debt repayment each month and all of your debt will be charged interest at your home loan’s rate. This rate is typically lower than other credit types.
You can even set specific repayment terms for your debts within the home loan (e.g. 5 years to repay your car loan).
8. Fixed rate borrower? Get prepared for your fixed term to end
If you have a fixed rate home loan that you got when fixed rates were ultra low, check when it expires. If your fixed term ends in 2023, you should start planning your next steps.
Interest rates rose considerably in 2022, so your repayments are likely to increase once your fixed term ends.
When a fixed rate ends, the loan typically reverts to a variable rate offered by the lender. While you can do nothing and stay on this rate, it usually isn’t the most competitive.
It may be a good idea to refinance to a competitive home loan as your fixed term expires.
If you’re concerned about your ability to handle higher repayments, get in touch with your lender’s hardship team as soon as possible to avoid potential mortgage stress or other negative outcomes.
9. Reassess your budget. A good budget can make or break your attitude to your finances – no matter your income.
If your mortgage is creating too much pressure on your financial position, consider re-evaluating your budget.
Maybe certain funds need to be switched around and reallocated elsewhere, or maybe you need to reassess your priorities. For example, if you’re currently paying for an expensive gym membership, maybe it’s worth switching to a cheaper gym or cancelling the gym membership and doing home workouts instead.
10. Set a home loan balance goal. My final home loan resolution tip is to look into setting a goal for your home loan balance. Come up with a specific number figure of how much of your home loan balance you want to pay off in 2023.
A good way to start is to see how much you paid off your mortgage in 2022 and aim for a slightly higher number in 2023. When making a goal, account for changes in your income and personal circumstances that may influence how much you can repay.
Naturally, it’s easier to repay more of your home loan if you have a lower interest rate and low fees.
Call, email or text me to find out if you could get a better home loan deal and save big in 2023.
