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October 18, 2021

A Quick Guide To Optimising Your Home Loan

Are you in your new home and are ready to start paying off your home loan quickly? Let’s take a look at how you can optimise your existing home loan to pay it off more quickly, saving more money over time. When you originate a home loan through Stark Finance, we’ll help you pick a product that is right for your needs, especially if your financial situation is better so that you can pay it off more quickly.

Understand If Your Mortgage Has a Honeymoon Period

Many mortgage lenders will use this as a tool to entice new homebuyers. This is a loan that will generally have a lower mortgage rate during the first few years. After the “honeymoon” period, the higher variable interest rate will kick in and you will have a higher monthly payment. If you work with Stark Finance, we can help you get a good interest rate from the get go. If you are in one of those situations where the “honeymoon” period is over, work with us and we can see if refinancing is a good opportunity for you.

Consider A Loan Offset Account

These are great opportunities to reduce the size of your mortgage. If you have a mortgage loan offset account, this can save you interest. If the amount in your offset account is $20,000 and you purchase a $400,000 home, then the amount calculated on your balance would be $380,000. There may also be some tax savings available depending upon the type of offset account that you use.

Look Outside the Big Banks When Getting Your Home Loan

Sometimes, even though the big banks in Australia have advertisements that appear everywhere, that doesn’t mean they have a matching product that will save you money. In fact, if you work with a lender like Stark Finance (who has access to over 40 different home loan providers), you might get a lending product that is more amenable to a lower monthly payment and better overall interest terms.

Make Your Payments More Frequently

This is the biggest way to reduce the overall amount you will pay over the lifetime of your loan is to take advantage of fortnights. Simply split your monthly payment in two and pay it every fortnight. A $250,000 30-year loan will cost you $600,000 over the life of the loan if you make monthly payments. By splitting your monthly payment into fortnights (13 monthly payments instead of 12) you will save $76,000 in interest and six years off the loan term.

Other Ways To Optimise Your Home Loan

There are a few other ways you can save by making more payments or paying more over time. Here are a few suggestions:

  • If your home loan does have a honeymoon period with a lower interest rate, take advantage of this time by making larger payments in the beginning.
  • If you get a large sum of money regularly throughout the year (such as stock payments, tax rebates, etc.), put these towards your home loan payment.
  • Make payments greater than the minimum. You can easily make a payment that is $100 to $200 more than the payment amount.

Let Stark Finance know if we can help you look at your existing home loan to take advantage of our home loan optimisation service.