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With any long-term commitment, there is always the temptation to let your mortgage roll along, make your repayments as they fall due and think as little about it as possible. As long as you keep up the repayments, there's not much else you need to do, right?
This attitude can be a big mistake. Keep yourself up to date with what's happening in the marketplace. You might find that there's an opportunity to put yourself well ahead of the game. Rates change, new products and changes in the market itself may allow you to seize an opportunity or negotiate a better deal.
Stay informed and stay ahead of the game.
10. Get a cheap rate and invest the difference
When interest rates are low, like now, it is usually safe to say that inflation is also low. Thus, bricks and mortar may not be the best place to invest. Try getting the cheapest home loan you can find and make the minimum repayment. This allows you to use the extra cash to invest in other, more profitable areas.
You may find that the return you get on shares or some other type of investment means that you have created a nice little nest egg which you can use to pay off a bigger chunk of your home loan than you might otherwise have been able to do.
But beware - high returns often mean high risks. Before undertaking any investment, invest in a consultation with a qualified financial adviser.
11. Run an offset account
Instead of earning interest, any money you have in your offset account works to offset the interest you are paying on your home loan. For example you may have a mortgage of $300,000 at 6.5 percent and an offset account with $50,000 in it earning 3 percent.
This means that $250,000 of your loan is accruing interest at 6.5 percent but the rest is accruing interest at just over 3.5 percent (6.5 percent on your loan less the 3 percent the $50,000 in your offset account is earning). Imagine how much you can save!
Of course, the best sort of offset account pays the same rate as your loan (100 per cent offset).
12. Pay all your mortgage fees and charges up front
Some lenders allow you to add to the amount you borrow instead of coming up with cash for your upfront costs. While this can seem a blessing try to avoid doing this. Consider the following example:
Borrower A borrows $300,000 over 30 years at 6.5 percent. Her upfront costs are $1,000 but she has enough cash to make sure she can cover these. Her total repayment over 30 years will be $682,632
Borrower B takes out the same loan but doesn't have enough cash to cover the upfront costs. So he borrows $301,000, at the same rate. Her total repayment over 30 years will be $684,907.
Two thousand odd-dollars might not sound like a huge amount but what could you buy with it if it stayed in your pocket?
13. Pay your first instalment before it's due
With most new loans, the first instalment may not become due for a month after settlement. If you can manage it (and your lender will let you), pay the first instalment on the settlement date. If you do this, you will be one step ahead of the lender for the term of your loan. Every little bit counts.
14. Shop around and make sure your lender knows it
One of the most powerful tools you can have in the search for the best home loan is information. Make sure you have rung half a dozen lenders and brokers (as well done some internet research) before you start talking to your preferred lender about getting a new loan or refinancing your existing loan.
Make sure you know what rates and features are offered by each of your lender's competitors on comparable products. Be ready to tell the lender what you are looking for and don't be afraid to ask for extras. If they want your business, and know you know what you are talking about, they may be prepared to work that little bit harder to get your business.
Don't be afraid to walk out if you aren't getting the best possible deal you can.
15. Make sure your loan is portable
If there is any chance that you will move house during the course of your loan (and let's face it, there is a strong chance), make sure that your lender will allow you to transfer your loan to a new property and that it won't charge you the earth for the privilege.
Be careful. If you sell up and buy a new house, you could find yourself down thousands in discharge costs on your old loan and establishment fees on your new one.
16. Avoid bridging finance
Someone once said bridging finance is so called because it allows you to "pylon" the debt. The joke's appalling, but so is bridging finance. Unless you get your timing right you could find yourself with two home loans at the same time - with the bridging finance element costing you an extra couple of percent premium on the standard variable rate.
Consider using a deposit bond or selling before you buy, as it will be much more cost effective for you than another loan.
17. Choose the loan that suits your needs
Choosing a loan is about knowing what you want. Draw up a table of potential home loans and rank them. Make a list of all the features that are important to you and rank them according to importance. Give each feature a score out of 5 - one for unimportant right through to 5 for indispensable.
Use this technique for ranking the loans on offer and pretty soon you'll see the one that's right for you. Remember, different loans have different purposes so you need to match a loan to your need. Taking out an interest only loan suitable for investors if you are planning to live in the house is just foolish.
Ditching the features you don't need can save you up to 1 per cent on the interest rate of your loan. Over 30 years that's a whole lot of money you've just saved yourself.
18. Don't be afraid of smaller lenders with cheap rates
Since the advent of the mortgage managers over the past five or six years there's been a lot of talk about smaller and "non-traditional lenders" and how they have forced interest rates down. With the property boom, plenty of opportunities sprang up for smart lenders with low fees willing to take on traditional lenders and many have done very well indeed.
Some borrowers worry about what might happen if their lender gets into financial trouble. Keep in mind that you've got their money - so don't worry too much. There are some smaller lenders whose names might not be readily familiar but whose rates might be enough reason to get in touch.
Be wary, however. Some of these smaller lenders can have huge hidden fees and charges. It is true that the interest rate might be much lower, but in many cases, they exit (or penalty) fees can be very high if you refinance or pay off your mortgage in the first couple of years. Of course, if you're planning on staying with that lender for some time, then these fees will not impact your pocket at all.
About the author:
Kevin Saunders is one of the founders of MortgageLoanHints.com, bringing you tips and hints for paying off your mortgage quickly, helping you to use the power of a mortgage loan to increase your wealth and learn to take control of your own finances. You can see more of Kevin's articles here: http://www.mortgageloanhints.com
Mortgage Refinance News
Avoiding your own mortgage collapse (The News Journal) It used to be that homeowners struggling to meet their mortgage payments had two options -- refinance or sell the house. Foreclosures happened mainly to those who lost a job or suffered a medical misfortune.
4 things to know before you refinance your mortgage (Bankrate.com) The Federal Reserve's decision to buy up mortgaged-backed securities caused mortgage rates to fall and created new opportunities. Should you refinance your mortgage now? Before you rush to refi, take a few minutes to determine if it's the right move for you.
Some buyers may see higher loan rates (Boston Herald) Anyone looking to buy or refinance a relatively costly Greater Boston home should move quickly if they want to avoid higher mortgage rates. That's because federal...
Shopping malls, hotels near mortgage default; more looming (The Columbus Dispatch) WASHINGTON -- Black Friday's retail shoppers hunting for holiday bargains won't be enough to stave off what's likely to become the next economic crisis. Malls from Michigan to Georgia are entering foreclosure, commercial victims of the same events poisoning the housing market.
More mortgage woes loom (Reno Gazette-Journal) WASHINGTON -- The full scope of the housing meltdown isn't clear and already there are ominous signs of a new crisis -- one that could turn out the lights on malls, hotels and storefronts nationwide.
