Most people think that getting a home loan is the hard part and getting a home loan is not always easy, but managing your home loan is a skill that you need if you want to pay your mortgage off faster.
Getting A Home Loan Approved
Yes, if you have fallen in love with a new home then you might think that getting a home loan approved is the most important thing.
Too often we see people in a rush to get an approval and then take the first loan offered by the bank, thinking that a loan approval is a success. After all, they get the loan which allows them to purchase the new home.
Then the real hard part starts – paying off your home loan.
Pay Off Your Home Loan Faster
This is where you should concentrate your efforts, and here are a few tips to help;
Structure your mortgage properly – we typically suggest that you split your mortgage into at least three loans;
1. A small revolving credit loan which allows you to pay extra so that your mortgage is paid off faster, while also allowing you to control your loan rather than letting the bank have all the control.
2. Fix the majority of your mortgage to get the lower interest rates and more certainty.
3. Split the fixed portion into two loans and stagger the fixed terms so they do not come off the fixed rates at the same time.
Pay more than the minimum – if you have a revolving credit loan (as per suggested structure) then you can pay extra into that loan, and then make lump-sum payments off the fixed loans when they are refixed. Also at this time you can adjust the repayments so you are paying more than the minimum.
Small increases to the repayments can make huge differences over time.
An extra $50 per week on a standard $300,000 mortgage (at 4.50%) will see you pay your mortgage off almost 7-years faster and you will save over $60,000!
Make sure you continue to get competitive interest rates – too often banks will give you a good interest rate or other enticement to get you to sign up with them, but they then forget that you are a good customer and don’t really look after you as well as they should.
If you have a mortgage broker then ask them to negotiate interest rates on your behalf, and if you don’t yet have a broker then you should consider speaking to one. Good mortgage brokers will ensure you get the best interest rates every time and this is a service that costs you nothing as the banks pay the broker.
Don’t pay any loans where the interest rates are higher than your home loan rates. Often people are paying off credit cards where the interest is almost 20% or store cards which can be closer to 30%, yet they could be paying under 5%.
This is throwing your money away and the only winners are those banks and finance companies – not you.
Plan To Review Your Home Loan
To review and manage your home loan takes about 30-minutes a year and could save you thousands of dollars. As local Hobsonville mortgage brokers we offer to review your home loan for free so there is really no risk in getting some advice which may help, and it doesn’t matter if you have never spoken to a mortgage broker before or which bank you are with.
Contact us to schedule a time to review your home loan.
