Five things you must know about your home loan

Posted by Simon Dehne on July 6, 2016 in Latest News with No Comments


THERE are five things every mortgage customer should know about their home loan.

Despite the Reserve Bank of Australia keeping the cash rate on hold at 1.75 per cent today, all home loan customers should ensure they know the ins and outs of their mortgage and whether they are getting the best deal possible.
We’ve revealed the five most important aspects of your loan.
Homeowners need to ensure they’re getting the best possible deal.
INTEREST RATE
Alarmingly only 16 per cent of Australians actually know the rate they are paying on their loan research from UBank, a subsidiary of NAB, found last year.
Figures released by financial comparison website iSelect showed on a $300,000 30-year home loan with a loan-to-value ratio of 80 per cent the average variable rate is 4.29 per cent and monthly repayments are $1482.
However on their database there are deals as low as 3.89 per cent which reduces monthly repayments by $69 per month to $1413.
On three-year fixed deals for the same loan size the average rate is 3.18 per cent and monthly repayments are $1463 but some offers are as low as 3.74 per cent.
This would reduce monthly repayments to $1387 — a saving of $76.

So in a nutshell, make sure you shop around as you could be paying too much.
REPAYMENT SCHEDULE
ISelect’s spokeswoman Laura Crowden advises borrowers making loan repayments to pay more frequently than monthly because it will end up reducing your overall interest bill.
ISelect’s spokeswoman Laura Crowden says making more than the minimum repayment on your loan can help significantly reduce your interest bill.
ISelect’s spokeswoman Laura Crowden says making more than the minimum repayment on your loan can help significantly reduce your interest bill.Source:Supplied
“Always opt to pay your mortgage weekly or fortnightly rather than monthly,’’ she says.
“If you switch from paying monthly to fortnightly over the course of the year you’ll end up making one extra repayment which will add up over the lifetime of your loan.”
There are 26 fortnights in a year which is the equivalent to making an extra month’s repayment each year.
MINIMUM AMOUNT
On the average $300,00 30-year mortgage with the average interest rate of 4.29 per cent, by tipping in an additional $100 per month you could make massive savings.
ISelect results show you would save about $834 per year in interest charges and more than $10,000 over the whole life of the loan.
OFFSET ACCOUNTS
These are incredibly handy to help reduce your overall interest bill and Mortgage Choice spokeswoman Jessica Darnbrough says they should pay an important role in paying down your loan as quickly as possible.
Mortgage Choice spokeswoman Jessica Darnbrough says offset accounts are a good way to help reduce your interest bill.
Mortgage Choice spokeswoman Jessica Darnbrough says offset accounts are a good way to help reduce your interest bill.Source:Supplied
“While interest rates are important, it is just as important for borrowers to ensure they pick a mortgage that meets all of their needs, like loan repayment flexibility and offset and redraw facilities,’’ she says.
On a loan of $300,000 if the borrower has $10,000 in an offset account interest will only be charged on $290,000.
Borrowers should be mindful though that not all offset accounts are 100 per cent offset effective, so make sure you check this before signing up to a loan.
SPEAK TO YOUR LENDER/BROKER
Reviewing your home loan every 12 months is important to ensure your loan is suiting your needs and you are getting the best value for money, Darnbrough says.
“Borrowers should do their research, shop around online and talk to professionals about taking out the right home loan for their needs,’’ she says.

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