Refinancing your home loan can be a right pain in the caboose. The process whereby you switch your interest rate – usually to clear your mortgage faster, pay less overall or extract some equity to fund renovations – sounds great in theory, but can end up being a hassle, too hard or overly time-consuming.
If your current home loan is through a bank, refinancing tends to involve standing in line on your lunch break or listening to Greensleeves on the phone while you wait to speak to a broker. Confusion is likely to ensue, followed by tons of paperwork, before you decide the whole thing’s way too difficult and you can’t be bothered.
Well, now you can avoid all of those things by searching for a better deal on your mobile phone using a process that takes around 10 minutes. Here’s how to trial our tech and three other ways you can save on your home loan:
1. Use uno’s tech to find a better rate – it takes 2 minutes
A survey of 1500 mortgage holders by CoreData on behalf of uno found that 74% of Australian mortgage holders are put off switching lenders because of the time involved. Seventy-seven per cent view refinancing as a ‘hassle’.
As an active home loan manager, uno removes the hassle. We scan the market daily using our loanScore technology. Our tech can analyse your loan against thousands of home loan products in the market and see what else is out there.
Once we find a better deal for your circumstances – one that will save you some cash – we send an alert, letting you know it might be time to switch.
With your approval, uno can then act on your behalf – renegotiating with your current lender for a better rate, or switching you over to a new deal with another lender.
If you get stuck along the way or have any questions, our qualified team of experts are here to help 7 days a week. Give us a call, send an email or request a call back at a time that suits you.
2. Switch to weekly repayments
Most homeowners will pay off their mortgages monthly, simply because that’s the way their bank or lender set up their home loan. Interest accrues daily, so by moving to weekly repayments, you’ll actually pay off more of your loan each year (without really noticing) and reduce the overall interest you pay.
By way of example, let’s say you’re paying $1,875 each month on a $400,000 home loan, at 3.84%. Over 12 months, you’ll end up paying $22,500 plus $273,616 in interest over the life of the loan. By making weekly repayments, you’ll actually pay $468.75 each week, or $25,311 over the year ($2,811 more than if you were making monthly repayments). In this example, you have reduced the loan term by four whole years and reduced the total interest over the life of the loan to $232,337, which saves you $41,279 over the life of the loan.
While most lenders will allow fortnightly direct debits, not all will allow weekly repayments so speak to your lender about your options. You can generally get around it however by requesting a direct salary credit on your account where your account is suspended and you transfer the funds weekly – meaning the onus is on you to transfer them.
3. Set up your repayment date to be a few days after the day you get paid
If you get paid on the second Thursday of each month, set your home loan repayment date to be the following Monday each month. This leaves some room to extract money for bills, groceries and living expenses but pays off your loan as soon as possible – always the best option when it comes to keeping your interest low.
Mathematically, interest is calculated on the daily balance, meaning every lender does a calculation to say this person just accrued x amount of interest at the end of each day. If you can minimise that balance on that day, you save on interest and pay your debt off sooner.
4. Increase your payments by as little as $50 a week
A good way to pay off your mortgage sooner is to pay a little bit extra each time you make a repayment. An easy way to do this is to round up the amount you pay each week. If your weekly repayment is a number like the $468.75 example above, why not round up your repayments to $500 a week? The extra dollars will amount to an extra $1,625 a year on your loan and reduce your overall loan term significantly (by approximately 3.5 years). They’ll also save you $37,000 in interest over the life of the loan.
Doing the four things mentioned above should save you a bucket load of cash, particularly if you’re just haemorrhaging money because your lender is charging a rate that’s too high.
If you’d like to discuss any of these options in further detail, get in touch with us.