Get the right rate - Reduce your home loan repayments
Whether you’re just getting started on your journey to home-ownership, you’re a couple of years in and have started to reconsider your options, or you’re a mortgage veteran who’s frustrated with their lack of progress, the message applies equally.
Getting the choice between a fixed or variable rate can save you thousands in interest in the long run, and when it comes to your home loans, money equals time.
Fixed vs variable
If you’ve taken a fixed rate, there may be a limit to how much extra you can pay off your loan without incurring a penalty. If you’re still in the fixed-rate period of your loan, make sure you contact your bank before making any extra repayments.
With a variable loan, it’s a different story. Greater Bank variable home loans allow you to repay as much as you like off your loan without penalty. (This may not be the case with all banks)
Pack a repayment punch
Often, making repayments on your Home Loan becomes just another bill you tick off each month. It’s important not to think about your repayments like this, however.
Each repayment moves you one step closer on the journey from owe to own, so the power is literally in your hands.
A simple way to reduce the size of your mortgage is to just increase the amount you chip away each month. We’re not talking anything excessive – be sure not to break your budget. The important thing to remember is that every extra dollar you pay off is one less dollar you’re being charged interest on.
Getting into the habit of upping your repayments is easiest done earlier on in the loan term.
Change your schedule
Another simple thing you can do to help pay off your loan sooner is to change the frequency of your repayments. It’s easily done – just set and forget, and could save you serious money long term.
Making repayments fortnightly instead of monthly means you’ll end up making an extra monthly repayment every calendar year. Think about it – there are 26 fortnights in a year, whereas paying by the month will only end up being 24 fortnightly repayments (12 months).
You can make this change simply in one of three ways:
1. Online
Update your repayment frequency in Online Banking
2. Over the phone
Ask us to make the change for you on 13 13 86, or
3. In branch
Pop into your nearest branch to speak to your lender.
Utilise lump-sums
Every once in a while, life smiles on us in the form of a one-off lump sum payment. Doesn’t matter where it comes from – bonus at work, tax return, inheritance – cash is cash!
As hard as it may be to part with, making a one-off lump sum repayment to your home loan can significantly advance your position on the path from owe to own.
If you can resist the temptation to withdraw the cash and dive into it like Scrooge McDuck, a lump sum repayment will reduce your mortgage balance, meaning you’re only being charged interest on a smaller amount.
Power of offset
If your loan features a 100% offset account, you’re in luck. What you have there is a no-brainer way to reduce the amount of interest you’re paying on your Home Loan, helping you pay it off sooner.
Every dollar you’re able to save in the offset account is effectively removed from the loan total you’re charged interest on.
For example:
You owe: $250,000
You have $10,000 saved in your Loan Offset Account
The bank will only charge you interest on $240,000 ($250,000 - $10,000)
People also ask...
It's possible to reduce your home loan in a number of ways:
- Make sure you're on the best interest rate possible. This means that with each month you're repaying more off your principal loan amount.
- Make additional repayments. Whenever you can, pay a little extra off your loan and reduce the overall balance.
- Discuss shortening your term with your lender. This will mean you will pay off your loan quicker, but it also means your regular repayment amount will go up, and that some lenders may charge to charge your loan term.
You can make lump sums off your mortgage, but be aware that the type of loan and interest rate you have may mean you incur costs.
You can make additional payments during a fixed period on Principal and Interest and Interest Only loans but a pre-payment fee may apply.
You can make extra repayments up to 5% of your original loan amount before there is any chance that a prepayment fee may apply.
Pre-payment fees don’t apply to an extra repayment on a variable rate home loan.
Yes, but it's important to be aware that during a fixed period, for Principal and Interest and Interest Only loans, a pre-payment fee may apply.
You're able to make extra repayments on these loans until you reach 5% of your original loan amount before a prepayment fee may apply.
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*Conditions, fees and charges apply to all loans. Subject to meeting Greater Bank's lending criteria.
Greater Bank, part of Newcastle Greater Mutual Group Ltd ACN 087 651 992 Australian Financial Services Licence/Australian credit licence 238273
++ $2,000 cashback for loans ≥$250,000 with LVR of less than or equal to 80%, or $3,000 cashback for loans ≥$500,000 with LVR of less than or equal to 80%,. Applications must be submitted by 31/05/2024 and funded by 31/08/2024. Only one (1) Cashback Payment per eligible loan, and for first eligible loan only. Not available in conjunction with any other promotional payment. Offer may be varied or withdrawn at any time. See the full Cashback Offer Terms and Conditions. Terms, conditions, fees, charges and credit criteria apply.
~At the end of the fixed rate period customers can chose to re-fix their loan for another fixed rate period or let the loan revert to the applicable variable interest rate based on the loan and repayment type.
^Comparison rate is based on $150,000 over 25 years. WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
#Discounted rates include a discount on Home Loans of $150,000 or over and for owner occupied Home Loans with an LVR 80% or below and for investment Home Loan with an LVR 80% or below and apply to new borrowings only. Discounted rate not available for Line of Credit facilities.
+Additional costs may apply if your loan has a fixed rate.
All new interest-only home loans, attract a 0.10% p.a. margin above the applicable Principal and Interest base rate. All new Line of Credit home loans, attract a 0.10% p.a. margin above the applicable Line of Credit base rate. The all-up interest rate which includes any margins, will be set out in your credit contract. View our Terms and Conditions.
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Rate City Gold Award 2024, see http://ratecity.com.au/home-loans/awards for more information