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How to save on your home loan to achieve financial freedom

Do you have a new home loan and can’t wait to get debt free as soon as possible?

You try to pay a little extra each month; but life gets in the way at times. It could be an unexpected car repair or a much-needed weekend getaway or a little too many drinks, more than a couple of times, at your favourite bar – these small overheads can add to your monthly expenditure considerably.

 
The secret to financial freedom
 

So, what is the key to financial freedom?

Discipline – as everyone would tell you. But, where’s the motivation?

Take Lisa, for example:

Lisa borrowed $350,000 to purchase a house worth $500,000. She borrowed the money for 25 years at a rate of 4.00 per cent.

Using HashChing’s online repayment calculator, you’d find that the loan, at that rate, would cost Lisa $554,228.68 over it’s full term. Thus, Lisa would be paying $204,228.68 in interest, in addition to the $500,000 that she paid for her house! That’s a whopping $704,228 of her hard-earned money!

 
reverse mortgage calculator - Bob Case study
 

So, now that you have done the math, you must be wondering how to avoid throwing your money away to the banks?

Let’s start by telling you a secret. Right now, is probably the cheapest time to pay off your home loan. With talks about the next movement in interest rates being upward, there couldn’t be a better time to pay down your mortgage than now.

Of course, you could choose to stick to the bank’s schedule and wait 25 years to own your home while you pay a ‘tub’ full of interest. Or, you throw every extra dollar at your mortgage to bring down the principal amount – which means, savings in interest, lower repayment amount, and early financial freedom from debt.

But, wait. Isn’t that the crux of the problem? Having extra dollars to pay down your mortgage each month?

Creating a good household budget, and sticking to it, is an obvious solution to that problem. But, there’s something else you could do about that, too. By merely shrugging off your laziness and checking the rates you are paying on everything from your insurance to utilities to mortgage, you might find that you are spending much higher than the market average. By comparing rates from different service providers, it is possible to land yourself a better deal and save thousands of dollars each month.

Lisa’s home loan is a case in point. At 4.00 per cent, she is probably paying too much interest to her lender. Especially for an over 80 per cent LVR loan, it is possible to lock in a rate as low as 3.39 per cent with HashChing – where you can compare broker pre-negotiated home loan deals from over 60 lenders in Australia.

If Lisa switches to a rate of 3.39 per cent from her current rate of 4.00 per cent, her monthly repayment amount will reduce by $115.83, saving her $34,747.97 over the life of the loan. But what if Lisa switches to this rate and continues paying the same repayment amount?

That’s an additional repayment of $115 each month!

(Don’t forget to check with your bank if there are any charges for making additional payments.)

Assuming that Lisa makes the switch in the third year of her home loan, she will save an additional $13,000 and also reduce two years from her loan term. Use our handy additional repayment calculator to crunch the numbers for yourself.


Talk to an expert

With several competitive home loan deals available in the market currently, if you are paying anything more than 3% on your home loan, you are probably paying too much interest.

According to experts, reviewing your home loan every six months or so helps you stay on top of your mortgage, by confirming whether you are on the best deal in the market or not.

Size up your mortgage against the most competitive home loan deals in the market by comparing home loan rates. Just a few seconds of your time could put hundreds of dollars in your pocket each month. Or, if you don’t feel up to it, fill up this short contact form so that we can put a verified mortgage broker in touch with you to do all the legwork on your behalf and help you achieve the financial freedom you deserve!

Remember, money saved is money earned. And every dollar counts….

About HashChing
HashChing is an online mortgage marketplace that enables Australian homebuyers to compare broker pre-negotiated home loan rates online. Aspiring home borrowers can get in touch with our verified broker partners online to have their queries answered by experts in a transparent manner, free of cost. Click here to browse our broker database.

 

By Vidhu Bajaj,
HashChing Content Writer

 

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HashChing is helping Australians by providing access to pre-negotiated home loan deals. Obligation free consultation with one of our partner brokers might save you time, hassle and money.

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