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Tips to manage home loan repayments

By Greater Bank

Ensuring that you meet your repayments on time or even early is a habit that can make life easier to manage your home loan long-term. 

Below are a few tools and strategies that may be able to help you.

Different repayment types

Depending on your home loan structure, there are various methods to manage your repayments. Below are some common repayment options for variable home loans. However, you should consult with your financial institution or lender to discover the option that best aligns with your financial situation.

Fixed/nominated amount

A fixed amount, as the name implies, refers to a predetermined sum that you designate for each payment cycle. This approach simplifies your budgeting, as it allows you to know precisely how much you will pay and when. However, it is important to note that this amount does not automatically adjust; therefore, you will need to update it if your minimum repayments change.

When interest rates are decreasing, the impact may not be as significant since this reduces the minimum repayment amount for those who opted to pay extra on their loans. However, it becomes a crucial factor to consider as interest rates rise. In such cases, it's essential to adjust your repayment amount accordingly to avoid falling behind on your financial obligations.

Minimum repayment amount - Automated repayments

Your minimum repayment amount will differ slightly from the previous example, adjusting to reflect the amount owed each month. This flexible option is ideal for those who prefer a "set and forget" approach, allowing repayments to align with any changes in rates. Additionally, if you choose a payment frequency other than monthly—such as weekly or fortnightly—your minimum repayment amount will be automatically divided accordingly.

Paying off more than your minimum repayments

A handy feature of most variable home loans is that you can choose to make additional repayments, potentially saving thousands over the life of your loan. One way to do this is known as your minimum repayment plus a fixed amount extra that you choose to pay each month. This means your repayments will automatically vary in line with any rate changes, but you’ll also pay an additional amount on top of that, putting you in advance of your loan.

You have the flexibility to choose your repayment frequency—whether it's monthly, fortnightly, or weekly. An advance amount acts as a safety net, providing an emergency buffer. In the event that you encounter difficulties or miss a payment, funds will be drawn from your advance account. Additionally, for eligible home loan accounts, you have the option to access these funds or 'redraw' them for purposes such as renovations.

Setting up or changing your minimum repayments

Your financial institution should be able to help set up and adjust your repayments, or you may be able to do it yourself online via internet banking or your banking app. You’ll need to know what your monthly minimum repayment amount is and select an account for the funds to transfer out of.

Your financial institution should always notify you of any changes to your variable interest rate and minimum repayment, so make sure your contact details and communication preferences (electronic or mail) are up to date.

What if I miss a repayment?

If you don’t have an advance amount and miss a payment or don’t pay it in full, this is known as going into arrears. It can happen for several reasons:

  • Repayments have not been set up. It may be up to you to set up your repayments once your loan starts. Check this with your lender.

  • Timing is essential. Your repayment may occur earlier than the availability of your funds if your designated repayment date coincides with a weekend or public holiday.

  • Insufficient funds. You select a fixed amount, but the interest rate increases, and you don’t adjust your repayments, or you forgot another bill was coming out and you’re a little short on the day.

Usually, you will be charged a default fee at the end of the month when one or more payments are in arrears. Your financial institution may contact you if you go into arrears to check you are able to continue meeting your repayments. Whether the missed payment was accidental or you’re experiencing some financial difficulty they’ll be able to assist you in getting back on track.

Other factors affecting loan repayments

Interest rate changes can be hard to predict but may affect your repayments if you’ve opted for a variable home loan. And if you’ve opted for a fixed rate home loan, it may convert to a fixed rate at the end of your term, so keep an eye on what the market is doing to avoid any nasty surprises.

Make sure you factor in any other debts like credit cards or personal loans to your budget so that you can cover all your repayments or look at consolidation options.

It is important to consider additional factors such as unforeseen events like illness or unemployment. If you find yourself in a position where making repayments becomes difficult, reach out to your financial institution to explore the available hardship options. 

Terms, conditions, fees, charges and credit criteria apply. This article is intended to provide general information of an educational nature only. Information in this article is current as at the date of publication.

Making home loan repayments

There are several options for setting up your home loan repayments, depending on your financial goals and circumstances. You can also choose to repay your loan weekly, fortnightly or monthly to suit your budget.

Monthly repayment only: You can easily set up an Easypay repayment for all Greater Bank home loans via online banking. The 'monthly repayment only'  option will automatically increase or decrease in line with interest rate movements. You can also opt to make your monthly repayment weekly or fortnightly. You can also choose to add an additional amount your monthly repayment if you would like to pay more each month.

Fixed amount: This option is available if you opt to nominate a fixed amount. Changes to the amount will need to be managed by you via online banking in line with interest rate movements as the repayment amount will not change automatically.  

If you have automatic transfers set up from another financial institution, you’ll need to contact them to update your repayment amount or check your current transfer amount.

You can set up an automatic home loan repayments in online banking or our mobile app.

  1. Log in and go to 'Transfer' > select the account you’d like to pay your loan from > then select your loan

  2. In the ‘Type’ field, you can select from the drop-down menu the transfer type.

    • Monthly Repayment Only – this is the monthly repayment on your loan calculated at the time of payment

    • Monthly Repayment Plus Extra – Pay a fixed amount off your loan, in addition to the monthly repayment on your loan, calculated at the time of payment.

    • Fixed Amount - As the name suggests, a fixed amount is a set amount you nominate for each payment cycle. While this is an easy way to know exactly how much you’re paying and when, the amount won’t automatically adjust, so you’ll have to update it if your minimum repayments change.
      This isn’t as big a deal if interest rates are decreasing, as this lowers the minimum repayment amount for many people who choose to pay the extra off their loan, but it’s an important consideration as interest rates increase, so you can adjust your repayment amount if necessary to ensure you don’t fall behind.

  3. If you want to set up a recurring payment, select ‘Recurring’

  4. Then select the frequency – Weekly, Fortnightly, Monthly

  5. Select a start date by tapping into the date field, and a calendar will appear.

  6. Select when you would like this to end – either ‘Never’ or ‘On a specific date’

  7. Click ‘Next’

  8. The click ‘Confirm and transfer’

If you have a scheduled Fixed Home Loan or Personal Loan repayment that you’d like to change, you can edit this by going to ‘Scheduled’ located in the side menu if accessing Online Banking on a desktop, or going to ‘Manage' > 'Scheduled’ if using the app.

  1. Select the scheduled payment for your loan

  2. Select ‘Edit’ and make your changes

  3. If you wish to delete the payment select ‘Delete’

If you have a Monthly Repayment Only or Monthly Repayment Plus Extra and wish to change this, you will need to delete these, as these payment types can’t be edited.

Pay extra on my fixed rate home loan without a penalty?

You can make additional payments during a fixed period on Principal and Interest and Interest Only loans but a pre-payment fee may apply.

You can make extra repayments up to 5% of your original loan amount before there is any chance that a prepayment fee may apply.

Pre-payment fees don’t apply to an extra repayment on a variable rate home loan.

A prepayment fee may apply to extra repayments you make over and above the 5% threshold.

A fee only applies if the current rate we could relend those funds at for the remainder of your fixed term is lower than the rate your loan is fixed at.

The fee, if applicable, is charged to your loan account at the end of the month that the extra payment is made.

When this fee does apply, it will only represent a small portion of the interest you may save by making the extra payment.

Even though your loan will be debited with a fee, it may still be beneficial to make the extra payment and reduce the interest charged to your loan.

Please take into account your own individual circumstances when making any extra payments.

Example 1 – no pre-payment fee
  • Original loan amount: $150,000 fixed for 3 years @ 7.0% p.a.
  • Extra payments made that month: $6,500

In this example, no prepayment fee will apply.

The total amount of extra payments is less than 5% of the original loan amount ($7,500).

Example 2 – pre-payment fee applies
  • Original loan amount: $150,000 fixed for 3 years @ 7.0% p.a.
  • Extra payments made that month: $9,000
  • Remaining Fixed Period: 2 years
  • Current 2 year Fixed Rate: 6.75% p.a.

In this example, a prepayment fee will apply.

The total amount of extra payments is greater than 5% of the original loan amount and the current fixed rate for the remaining fixed period of the loan is lower than the rate that the loan is fixed at.

Note: Pre-payment fees don’t apply to an extra repayment on a variable rate home loan.

To calculate a pre-payment fee we take the extra payment over and above the 5% of the original loan amount and times it by the remaining fixed period and then times it by the interest differential.

Let’s look at an example:

For a $1,500 loan pre-payment, with a remaining fixed period of 2 years and an interest differential of 0.25%, the calculation is:

$1,500 X 2 X 0.25% = $7.50

Or, $1,500 times 2 times 0.25% equals a $7.50 pre-payment fee in this example.

Helpful home loan tools and calculators

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