Select your repayment type wisely
To encourage borrowers to make Principle & Interest repayments (and actively reduce their debt over time), many lenders now charge a higher interest rate for Interest Only repayments.
Unless you are paying Interest Only repayments on your Owner Occupied loan as part of a broader strategy, you are likely to save money by switching to Principle & Interest repayments. Not only can you save money on a reduced interest rate, but as an added bonus, you’re also likely to pay your loan off faster.
Make sure you have the right loan
In response to regulators enforcing a 10% yearly growth limit on a lender’s investment loan book, lenders have increased the rate on investment loans.
If you bought your property to rent out initially but are now living there, don’t forget to switch the loan over to ‘Owner Occupied.’ Otherwise you will pay a higher rate of interest than you need to. No one wants to do that voluntarily!
Contribute as much as you can to the purchase price
Lenders have become more conservative with their rate discounts recently. They seem to be offering greater discounts to borrowers in strong equity positions or those with larger cash deposits.
If you can stick to borrowing no more than 80% of the purchase price (i.e. this means you need to save a larger deposit, get assistance from family via a security guarantee or buy something cheaper), you might secure a bigger pricing discount – and therefore pay a lower rate of interest over the life of your loan.
But that’s not all…
Whilst there are other factors affecting your interest rate, it’s not just a matter of setting and forgetting about your loans.
The lending environment has changed SO MUCH in recent months, which means you need to regularly review your loans.
If we haven’t seen you in a while, please give us a call to book in a home loan review.
It’s our job to ensure you never pay more interest than you need to. It’s your job to give us a call.
