How much does a home loan cost?
Your mortgage may be the biggest debt you’ll ever have so it’s worth knowing just how much interest you could pay over the life of the loan.
When calculating the cost of a loan, using the comparison rate should give a more realistic view than simply relying on the advertised interest rate, as comparison rates include many of the lenders’ fees and charges.
Here’s an example – we’ll use this calculation to compare against in our cost saving tips below or try our recommended mortgage calculator to see how much you can borrow and what your repayments will be.
1. Use a budget
If you want to save money, you must spend less than you earn, right?
Only when you can see your true money position can you be responsible for the desired outcome – so you need to devise a budget and keep to it!
Most people, including many high income earners, don’t understand that they can’t live beyond your means yet they expect things to be different despite continually overspending.
For example, as a way to save money that could be more effectively used on your mortgage, why not take your shopping list with pre-planned meals and ingredients with you when shopping for groceries and never go shopping when you’re hungry.
2. Keep your savings on your mortgage
It’s astounding how many families have one or more savings accounts while also paying a mortgage.
Why pay tax on interest earned from these accounts (even if it’s only a small amount) when you could be offsetting the higher interest cost of your mortgage?
Technology has allowed us to have more control and flexibility over our bank accounts than ever before.
So, instead of squirreling your savings in a separate account, why not save additional funds on your mortgage account where it can reduce your interest repayments while still being available for you to access when you want?
3. Put your income/s in your offset account
While your income is resting in an offset account, you are saving interest every single day because interest is charged monthly but calculated daily.
Even if you spend the majority of your income by month’s end (which you shouldn’t if you budget!) you can still pay your mortgage off quicker by depositing your income directly into an offset account thereby lowering your interest payments.
4. Pay yourself first
If, like many Australian families, you are struggling to meet your financial commitments every month or your expenses fluctuate from month to month, I suggest you pay yourself 10 per cent of your income before you pay anything else.
It’s an old but wise maxim to pay yourself (in your savings or offset account) at least 10 per cent of your income. Then live off the rest.
This creates forced savings as well as some interest cost savings, with this extra money accruing if you allow it too.
5. Review your costs periodically
Once you know where you are at and how much you are spending, it’s easy to compare and lower your expenses.
Contact your mobile phone, utilities and other bill carriers and negotiate a better deal.
When buying household items and gifts, research the different deal sites and online shopping sites, which can save you up to 70 per cent or more on the cost of identical or comparable items.
When reviewing your costs, eliminate any unnecessary costs.
Ask yourself, for instance, if you really need Foxtel?
You see it’s not always about going without, often it’s about finding more efficient ways to achieve the same outcome.
6. Every winner needs a coach or mentor
There’s never been a sporting star that didn’t have a coach to create their goals, habits and mindset, and to hold them accountable to them.
The same can be said of your finances and property dreams and goals.
You should seek out a quality coach or mentor and have them on your team –this is possibly the best investment you can make.
7. Review your financial position regularly
Let me be clear: those who are successful financially all have one thing in common.
Quite simply they always know exactly where they are financially.
Conversely, those who are unsuccessful usually don’t have a clue where they are at financially at any given time.
You need to review your financial position on a regular basis.
There shouldn’t be any financial surprises if you’re completely aware of what income is coming in and what expenses are going out.
Try and save on other regular outgoings and living expenses such as electricity and gas. A good Auckland electrician can help you save thousands off your bill each year with the latest energy efficiency bulbs and appliances.