March 2012

There are a number of great strategies for reducing your loan balance and saving thousands in interest repayments. It's never too late to begin, so pick and choose which of the following work for you.

1. Review your interest rate annually

Home Loan products and interest rates change regularly so you need to review to ensure the rate you originally negotiated is still competitive. Have a mortgage broker review your product and interest rate to ensure you are receiving the best offer for your circumstances. This review is generally free.

2. Switch to weekly/fortnightly repayments

Pay fortnightly or weekly instead of monthly. Mortgage interest is usually calculated on a daily basis so the more frequently you pay, the more you will save, even if you are not paying any more than you did previously.

3. Make extra repayments

Extra funds have the immediate effect of reducing the loan balance. Every dollar you put on your repayments will reduce the principal and therefore the interest payable next repayment. This saving then compounds, making a significant impact over the life of your loan. Your loan's redraw facility offers an easy and efficient way to apply these additional payments.

4. Open an offset account

Have your salary paid into an offset account, which is linked to your loan account, and allows you to use your savings account balance to reduce the amount owed towards your loan. The balance is deducted from your loan account before the interest on your home loan is calculated - which means less interest is charged to your loan. As your mortgage broker we can explain the pros and cons of offset accounts or similar products like line of credit.

5. Align your salary and home loan payments

Align your loan repayment period with your salary payment date in order to maximise the amount you have available to pay onto your home loan.

6. Pay your salary into your home loan

An all-in-one loan account allows you to pay your salary directly into your loan, which reduces the principal amount owing and thereby the amount of interest charged. It acts as a combined mortgage, savings and cheque account, allowing you to access the funds you have left over and above the minimum monthly repayment amount to pay monthly expenses. All-in-one accounts often have higher interest rates than some other products so speak to us about their suitability for your individual circumstances.

7. Keep repayments up if interest rates fall

When interest rates fall, resist the temptation to reduce your monthly repayments. Maintaining the same repayments is a simple way of helping to pay down your loan.

For further information, please contact the team at Matrium Financial Services today on 02 88183255.