Last Updated: 6th July, 2022
Whether you are just thinking of starting out on your home-buying journey or are already halfway through, you can always find ways to save money on your mortgage. Below are 9 proven tips on how to save money on your home loan through each step of your journey.
How To Save Money On Your Deposit
A standard home loan has an 80% Loan-to-Value Ratio (LVR). The borrower needs to contribute the remaining 20% as a deposit. Here’s how you can save money on your deposit:1. Negotiate With The Seller
Obviously, a lower price for the property you are looking to purchase can significantly bring down the total amount you need to borrow and the deposit you need to contribute. Working with a real-estate agent and getting an inspection report for the property are the two most effective ways of negotiating a more favourable price. You can also ask for items such as furniture and fixtures to be included with the purchase. While this does not reduce the property price, you’ll save by not having to purchase the same items for the house. The amount you save by doing this can be used to pay your deposit, or to make your monthly mortgage repayments.2. Get An LVR above 80%
Whether you don’t have the standard 20% deposit contribution saved up or you want to invest some of your savings somewhere else, borrowing at an LVR above 80% is an option. There are plenty of ways to borrow above 80% LVR without paying Lenders Mortgage Insurance (LMI):- Borrow up to 105% of the property value with a guarantor (your guarantor’s property must be in Australia).
- Borrow up to 100% using the equity in another property.
- Borrow up to 95% with the First Home Loan Deposit Scheme (FHLDS) or other government schemes.
- Borrow up to 95% with a gift deposit.
- Borrow up to 95% with a personal loan as a deposit (low-risk borrowers only).
If you qualify for one of the above schemes, you can save thousands of dollars on your deposit and LMI.
How To Save Money Through Researching Loan Products
It’s important to shop around for the best home loan rates. You may be tempted to go with the first lender you find, but this can often lead you to spend more money than necessary. Here’s how you can save money by researching loan products:3. Find The Best Loan Offers For Your Situation
The interest rates lenders offer differ on a case-by-case basis. For instance, the rates offered to an expat, a self-employed individual, someone with bad credit, and a PAYG employee with good credit scores differ vastly at traditional banks. If you are someone who doesn’t have a standard loan application with no complications, then looking beyond traditional banks is ideal. There are wholesale lenders, specialist lenders and online lenders that cater to complicated loan applications. Some provide cheaper interest rates, while some accept loan applications that traditional banks reject but with a higher interest rate. After finding lenders that cater to your situation, you can start looking for the cheapest rates and best offers, to save as much money as possible. The profession you are in can also get you discounted loan offers, including as much as a 1.5 percentage point discount on your interest rate. Here are some professions that get special deals and offers from lenders:- Healthcare workers
- Firefighters
- Lawyers
- Government employees (federal and state level preferred over local level employees)
- Australian Defence Force (ADF) staff
