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In September, the average home loan size for an established dwelling rose to $574,000. This translates into a monthly repayment amount of over $2,500, spread over a 30-year term, at a 3.14 per cent per annum rate. The amount is also about one-third of the average salary of Australianprofessionals working full-time, leaving young families with a mortgage hardly anything to save. 

 

Many families find themselves stretched out too thin while servicing a mortgage, making it impossible to save for other life goals or to even plan a vacation. If you find yourself in a similar situation, it’s not just your mortgage at fault. Making small changes to your lifestyle and looking for a better deal on everything, from your insurance to your mortgage, can help you save over time.

 

Here are some money saving tips to help you eliminate unnecessary expenses and free up your budget:

 

Money saving tip 1: Set a savings target

 

According to financial experts, it is essential to set a fixed saving target that defines how much money you need and when to start saving for a goal consciously. It’s even better to have separate accounts for each goal – such as a vacation account, a wedding account, or a higher education account – and put away regular monthly amounts into each account, as soon as you get paid, until your goal is reached.

 

Of course, you can continue saving in a single account, but having designated accounts for each goal will make you think twice before you draw down anything, helping you avoid wasteful expenses and keeping your savings intact. 

 

Automating your savings can also help you reach your savings goal faster. You can set up a direct debit to transfer a part of your pay into your savings account or ask your employer to do this for you. This way, you’ll start building your savings without even having to think about it.

 

Some savings accounts also let you round up your daily purchases to the nearest $1 or $5. The difference is directly sent to your savings account. So, if you buy a coffee worth $3.50 every morning, 50 cents will go straight to your online savings account each time you purchase coffee. At the end of the year, you’ll save more than $180.  

 

Money saving tip 2: Stop paying the lazy tax

 

Did you know that Australians pay $11.6 billion in lazy tax each year by not shopping around for the best deals offered by banks, insurance companies, grocery and utility providers? Meanwhile, those who regularly compare different offers and switch providers have collectively saved over $2.5 billion in the past five years.

 

Being a loyal customer isn’t always rewarding. Whether you feel strung by astronomical energy bills each month or find yourself paying a little too much for your broadband connection, it only takes a few minutes to compare different plans and move to a better deal to boost your household savings.

 

Money saving tip 3: Refinancing your home loan

 

If you haven’t reviewed your home loan in the past few years, the chances are that you’re paying a much higher interest rate than the national average. 

 

Refinancing your home loan to a lower interest rate can immediately save you money on your monthly repayments, which can add up to thousands of dollars over the life of your loan. Some lenders also offer lower fees and other discounts to new customers, adding to your savings further.

 

You can always compare different offers online and pick up the phone to negotiate a better deal with your lender. Since your lender may not want to lose a good customer, they might agree to reduce your interest rate, bringing down your monthly repayments instantly. You could even seek help from a mortgage broker to negotiate on your behalf or find a better deal to get the most out of your mortgage.

 

Money saving tip 4: Use an offset account

 

An offset account is like a transaction account linked to your home loan. While calculating your interest, the money in your offset account is offset against your home loan balance, bringing down the interest charged on your home loan and consequently your monthly repayments as well.  

 

Consider that you have $300,000 outstanding on your home loan and hold about $10,000 in your offset account. In this case, you will only be charged interest on the difference, that is, $290,000.

 

Certain lenders may also allow you to set up multiple accounts within your offset account, helping you save for specific goals. Of course, you are free to withdraw the money as you need, but as long as it’s sitting in the account, it will be offset against your outstanding loan.

In addition to an offset account, you could choose to make extra repayments on your home loan to pay it down faster. Some lenders also allow you to redraw the additional funds you have pumped into your home loan at no extra cost. 

 

Of course, nothing good in life comes for free, and that usually applies to your mortgage as well. Lenders typically charge less for a vanilla home loan than one loaded with valuable features like a 100% offset account or an early repayment facility. Do compare what you pay for these features vis-à-vis your potential savings to ensure you don’t end up throwing away your hard-earned money.

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