How to save more than $100,000 on your mortgage (even if you’re a spendthrift)

Font size :

The historically low interest rates means virtually all mortgage holders could pay at their bank’s “buffer” rate and potentially save hundreds of thousands of dollars, according to Smartline Personal Mortgage Advisors.

The “buffer” rate is about an extra 2% p.a. on top of the current home loan rate, and a lender uses it to assess if a borrower can afford a loan. Smartline’s strategy simply involves paying the monthly home loan rate at 2% more than the current rate.

Interest rates going down“This is one of the most simple and effective debt reduction strategies that home-owners can use,” says Smartline’s Executive Director, Joe Sirianni.

For example, at 5.25% p.a., the monthly repayment of a $350,000 mortgage is $1,932.71.  But at 7.25% p.a., the monthly repayment is $2,387.62 – an additional cost of $454.91. Therefore, paying an extra $454.91 a month means the loan would be paid off in 19 years and seven months, instead of 30 years.

It would also add up to a saving of $134,993 worth of interest, plus more if mortgage holders made ad-hoc additional repayments along the way, such as windfalls and tax returns.

“While this calculation is made on the assumption that the variable rate will stay at 5.25% p.a.., which almost certainly it will not, it does highlight the considerable impact that making additional repayments has on your home loan,” Sirianni says.

“While making higher home loan repayments might ordinarily be a stretch for some people, the historic low interest rates we are currently enjoying make this a strategy that pretty well everyone should be able to adapt.”

The RBA’s recent cash rate cut to 2.5% is the lowest level since 1959, while the major lender’s home loan rates are at their lowest since 2009.

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan

Mortgage News and Articles

CBA unveils new repayment simulator CBA unveils new repayment simulator

The simulator will show customers the differences between different types of repayments Read more

How to tell when a housing market is cooling How to tell when a housing market is cooling You need to check clearance rates, listings, and the price gap, among other factors ... Read more

Growing demand for green apartments in Sydney Growing demand for green apartments in Sydney Both owner-occupiers and investors favour eco-friendly buildings for their energy-saving features and reduced environmental footprint ... Read more

Are property investors as rich as they appear? Are property investors as rich as they appear? A multi-property portfolio doesn’t guarantee easy millions ... Read more

More mortgage news and articles

Sponsored Links

Tuesday, Sep 26, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Let us help you find the right home loan for your needs.

Tell us a bit about your circumstances:
  • Purpose of mortgage
  • Household Income
    $
  • How much do you want to borrow?
    $
  • How much deposit do you have?
    $
  • How much is your house worth?
    $
  • How much do you still owe on your mortgage?
    $
  • What type of mortgage do you have?


  • How much is your new home?
    $
  • How much do you want to borrow?
    $
  • How soon do you want a mortgage?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords