March 4, 2019

Following the outfall of the Royal Commission, our trust in banks and other lenders have plummetted. We honestly don’t know who to trust and who not to.

A recent study, performed by ‘home loan wrecker’ Athena in partnership with CoreData,  surveyed 1,000 Australian homeowners. The results showed that many of us are fed up with being ripped off and are feeling trapped in their current home loans. The survey also highlighted that many are wanting to make the switch away from the banks following the Royal Commission.

We spoke to Athena, who suggested some great hacks to ensure we’re getting the best deal on our home loan.

Hack 01 – A great rate that stays great

Honeymoon offers are just that. They never last. And once you’re hitched with a lender, you’re often blind to what’s going on behind your back- they could be cheating on you with rate creep and fees. This can cost tens of thousands of dollars over the life of your loan.

Find a lender that gives consistently low rates from Day One until Day None.

What should you do?
Consider switching home loans and enjoy the long honeymoon.

Hack 02 – Time is money

The shorter the loan, the less interest you’ll pay. It’s that simple. Guess why the banks want to lock you into a 30 year loan? Then tempt you to refinance every 5 years? Because just when you’ve been starting to climb that ladder, you slide down that snake and have to start back all over again.

So whenever you refinance, try not to default to a restart. Make sure you refinance with the number of years you have left. Or less! The shorter the better. You should note though, that the shorter the loan term, the higher the periodic loan repayments will be, which is why you pay your loan quicker with less interest.

What should you do?
Don’t restart, reduce.

Hack 03 – Fast-track your savings

You could score a lower rate by moving your home loan. But why not keep making the same repayments as what you were paying with your current lender? You’re already used to paying that amount onto your loan, and if you keep it up on our lower rate, you’ll turbo-charge your savings and nail your loan in no time.

Let’s break it down. If you moved from 4.30% (around the market average) for an owner occupier principal & interest loan of $400k to another lender’s lowest rate of the same loan amount and remaining loan term, you could save $66k in interest. By deploying those savings back into principal repayments on your loan, you could cut about 4 years off your loan and could end up saving as much as a whopping $108k off your loan!

What should you do?
Keep your current repayment amount and use those savings to fast-track to the finish line.

Hack 04 – Put more in your redraw

A Redraw is a great way to cut years off your loan without locking away your savings. Each deposit immediately reduces your loan balance by the same amount, and reduces your interest.

Let’s break it down. If you have money sitting in your savings account (at a rate less than your home loan rate) your money will be working harder for you if you put it in our Redraw. So, if you had $100k in an everyday savings account at 2%, you’ll earn $2,018 across the year in interest (and you may be taxed on that depending on your income threshold!). But if you put it in our Redraw at 3.49% (Comparison rate 3.51%^) you’d save $3,490 in interest across the year – and not lose any of it in tax either! We can’t give you tax or financial advice so go see your advisors to explain it more.

Make sure your lender won’t sting you with fees for moving your money in and out of your redraw.

What should you do?
Unless you can get a better savings rate elsewhere, pop as much as you can into your Redraw.

Hack 05 – Be more regular

Home loans have always defaulted to monthly payments. Lenders want it that way because the less often you pay during the month, the more interest you pay them. Just by making fortnightly or weekly repayments, you will reduce your loan amount quicker. BAM!

That’s because interest is calculated on your daily balance. So the less your balance is each day, the less interest you pay. Find a lender that lets you pay as free‑quently as you can – weekly or fortnightly.

What should you do?
Pay weekly or fortnightly to reduce interest repayments.

Hack 06 – 13 months a year!

Lenders split the year so you pay less. Find a lender that splits the year so you get ahead.

We all think there’s just 4 x 7 days each month, but only February has 28 days. Those extra 2 or 3 days each month add up to a whole extra month over the year. Rather than calendar months, find a lender that works the whole year into 52 weeks or 26 fortnights. So every year you get 1 full monthly payment ahead, which adds up to around 4 years off the life of the loan (on an average loan of $400k over 30 years)!

What should you do?
Add a month and subtract years off your loan by paying weekly or fortnightly.

Hack 07 – F*** fees

Playing on our apathy, the big banks charge Australians $4.5 billion (according to Choice.com.au in June 2018) every year in excess interest costs & fees. Bastards. They sting you to apply for the pleasure of getting a loan, every month for being a customer, and if, shock-horror, you ever want to leave.

These fees quickly add up; they could be thousands over the life of an average market loan. Find a lender that won’t charge you fees and that only passes on the fees they’re charged; minimal third party costs to originate your loan like valuations & legal fees.

What should you do?
Stay clear of lenders who charge you to join, stay or leave.

Hack 08 – Every little bit helps

Even the smallest extra repayments will make a big dent in your mortgage. Can you afford to put in an extra $50 a fortnight? It really does make a difference. For instance, an extra $50 on a fortnightly loan repayment, on a $400k loan at our lowest rate, slices nearly 2 years and about $20k in interest off that baby.

What should you do?
Make extra payments free‑quently .

Hack 09 – Totally lose it!

Follow all our home loan Hacks and you’ll go from a home loaner to owner in no time.

For instance, if you took an average home loan of $400,000 for 30 years at 4.30% with another lender paying monthly with no offset funds, and moved to a lender offering a rate of 3.49% (Comparison rate 3.51%^), paid weekly, and made extra repayments of $50 per week, you could save a game-changing 8 years and $137,000 interest over the life of your loan.

Average Australian home loan
Home loan
Owner Occupier, Principal & Interest over a 30 year term
Home loan amount = $400k
Interest rate = 4.30%
Repayment frequency = Monthly

You would take 30 years to pay it off and pay a total of $312k in interest

Athenamazing home loan
Home loan
Owner Occupier, Principal & Interest over a 30 year term
Home loan amount = $400k
Interest rate = 3.49% (Athenamazing Opening Offer) (Comparison rate 3.51%^)
Repayment frequency = Monthly

You would take 22 years to pay it off and pay a total of $175k in interest

^Comparison rate calculated on a $150,000 secured loan over a 25 year term. WARNING: Comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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  • Some great tips! I am a mortgage broker and banks offer great rates to get your new business, but unfortunately once they have it they don’t do much to keep it. It’s also good to review and ask your bank for a better rate every few years.

    Reply


  • Good to be reminded to keep on track

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  • All great tips and when you have extra money pop it in!

    Reply


  • Every little bit does help with a home loan.

    Reply


  • Get out of the home-loan mortgage as fast as you can and don’t keep adding to it if you need renovations – wait till you can pay them off yourself. Then find a credit union that will pay a high interest on your savings and give the big banks the heave ho.

    Reply


  • Pay it down as fast as you can!!!

    Reply


  • Good tips Research and asking professionals for advice helps

    Reply


  • So important to remember that every little bit helps, hack 8. Even if it’s just a little extra overtime money or bonus payments go a long way over the term of the mortgage.

    Reply


  • I know a couple who inherited some money and wanted to pay a fair sum of extra money off their home loan. The bank has set a maximum amount they can pay in advance per year. If they pay extra above that they are actually penalised. I also know a family who had their own business and asked if they could pay extra in advance, then if their customers were late paying their accounts the months repayment could be taken out of the amount they had paid in advance. They were told no so they didn’t pay in advance. Being a family of 7 they had to take that into consideration too.

    Reply


  • My daughter has just bought her first home and my son is looking to buy, so I’ll be passing these tips onto them

    Reply


  • Great tips. Definitely need an offset account and redraw!


    • These two are a must for a home loan – they make a difference.

    Reply

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