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Want to reduce the cost of your home loan

reduce the cost of your home loan imagePeople can feel pretty trapped by their mortgage, but there are a few ways that you can really take action to reduce home loans, particularly by avoiding or offsetting fees. Here are some tips on how to reduce mortgage debt.

Types of Fees

Application Costs

 This is the basic initial cost of setting up a home loan, and it can range from a couple of hundred dollars to up to one thousand. You can sometimes avoid these fees, though, if banks are trying hard to attract new customers. If you’re worried about repaying start-up fees when refinancing, try asking a lender if they would be willing to waive the fee. Greater Bank’s Ultimate and Investment Ultimate Home Loans don’t have any establishment fees.

Valuation Fee

You need a third-party valuation of your property. This is a factor in determining how much the bank will lend you. If you are refinancing, then getting your home in order (maybe a fresh paint job) may increase the value of the property.

Lenders Mortgage Insurance

This fee is payable if you borrow more than 80% of the property’s value - it goes towards paying for the lender’s own insurance policy on a defaulted loan. You can obviously avoid this by borrowing an amount underneath the threshold.

Annual Fees

These are just annual administrative fees - make sure you shop around to find the lenders with the lowest fees. Greater Bank’s Great Rate Home Loan has no annual fees.

Monthly Service Fees

Some lenders might charge a monthly administrative fee to service your loan - particularly if your loan comes with greater benefits. Make sure the benefits offset the monthly fee and, again, shop around first. Greater Bank’s Great Rate Home Loan has no monthly fees.

Repayment Fees

Often banks will charge you for paying your loan back faster than the terms of the loan agreement. This is to balance out the lost interest they will make on your reduced loan. Work out the balance between the fee and the money saved on interest to work out how much extra you can pay off.

Redraw Fees

Your loan might allow you to redraw on extra repayments you’ve already made and it might incur a fee. If your lender charges redraw fees, make sure you don’t repay all your available cash if you think you will need to redraw it back at some point. Greater Bank’s Great Rate Variable Home Loan has no redraw fees via online banking or any other ongoing fees.

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Late Payment Fees

Fees for not making your repayments on time - avoid these at all costs because they will really hamper your ability to get on top of your home loan.

Refinance Costs

There are costs you may have to cover if you decide to refinance. You should assess your financial position annually and try to find a lower mortgage interest rate. If you find one, take these fees into account to work out whether you’re better off, but don’t be afraid of them.

Top Tips to Reduce Mortgage:

  1. Create a budget and stick to it
  2. Make larger repayments
  3. Research interest rates and shop around
  4. Refinance home loan
  5. Balance fees with lower interest / more benefits

People also ask...

Yes, you can reduce the term of your mortgage in three ways:

  • Ensure you're on the best interest rate possible. This will mean that with each month you're chipping away more at your principal loan amount.
  • Make additional repayments. Anytime you can afford to, pay a little extra off your loan and reduce the overall balance further.
  • Discuss shortening your term with your lender. This will mean you will pay off your loan in a shorter amount of time, but be aware that this may raise your regular repayment amount, and that some lenders may charge to charge your loan term.

A property valuation is an assessment of how much money your home is worth, and is carried out by a professional property valuer.

A valuation is usually carried out when a property is being bought, sold or refinanced.

A valuation fee is the cost set by the valuer to prepare the valuation report.

Yes. A valuation is required whenever a property is being bought, sold or refinanced.

The cost of a valuation may vary, but in general, you should expect to pay in the region of $500 for a completed valuation report. 

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