There are various arrangements and strategies that can be set in place to reduce the total cost of a home loan.

These techniques can save tens of thousands of dollars and years off your mortgage.

• Be competitive by shopping around and soaking up as much information as possible before you talk to your bank or mortgage originator.
  During discussions, you’ll then be able to quote alternative rates and features offered by comparable products and the lender will know you’re perfectly prepared to go elsewhere.



• Don’t just turn to the big banks.
  There is nowadays a plethora of small, non-traditional lenders with very attractive rates.



• Most people shift house once every five years so make sure your loan is portable and can be transferred to a new property without excessive penalties.
  Without portability, the termination and establishment fees can be very high if you have to get out of your old loan and into a new one.



• If allowed, pay your first installment at the time of settlement rather than when it’s due... usually a month later.
  This way you’ll be one step ahead throughout the term of your loan.



• Early in your loan, try everything possible to get at least some of the principal paid off rather than just interest.
  It makes a difference.



• Repay fortnightly instead of monthly.
  There are 26 fortnights in a year but only 12 months, and paying fortnightly means you are effectively making 13 monthly payments every year, saving plenty over the term of the loan. You’ll hardly notice the difference in terms of your disposable income.



• Give up small luxuries you either don’t really need or which are bad for you anyway, such as cigarettes, drink and junk food.
  Channel the savings into reducing your principal and you’ll save plenty of money as you steer toward a luxury retirement.



• If you can, make repayments at a higher rate than necessary.
  If you have a loan at 7% and you are paying it off at 10%, you won’t even notice if rates go up. You’ll wipe tens of thousands off your principal over coming years and pay off your loan quicker.



• Split your loan, whereby you take part of your loan as fixed and part as variable.
  If interest rates rise, the fixed portion won’t move. If rates remain stable, you can use the flexibility of the variable portion and pay off that part more quickly.



• Pay your loan off as fast as you can. A typical loan paid out over 25 years costs more than twice the principal in interest payments.
  If you can afford to pay out a few hundred dollars extra and cut the term to 10 years, you’ll end up saving many tens of thousands of dollars.



• Check out what loan packages are available offering benefits such as fee-free credit cards, home insurance discounts and fee-free transaction accounts.
  Every little bit counts and you can possibly channel the small savings into your loan repayments, greatly enhancing their worth.



• Consider an all-in-one loan into which you can pay all your income and then withdraw living expenses using a credit card, EFTPOS or a cheque book.
  Because your whole pay goes into the mortgage account you reduce the principal on which interest is charged. Note that these mortgage accounts usually have a slightly higher interest rate than other loan types, should be managed wisely, and are best suited to high income earners.



• Consider an offset account whereby any money it contains works to offset the interest being paid on your home loan.
  AdditIonal interest savings can be obtained by using a credit card, with up to 40 days interest free, to pay your daily bills and establishing a periodical payment to pay off your credit card balance in full each month.



• Consolidate your personal and credit card debts under the umbrella of your home loan.
  Your home loan will invariably have a much lower interest rate.



• Consider using the equity collateral based on the difference between the value of your home and what you have already paid off on your loan.
  If used carefully, this equity can help to pay off your loan sooner. An equity loan might also enable property improvements which ensure an increase in home value.



• Don’t be scared of switching to a lender with a lower rate.
  If a competitor has a no-frills rate that is up to a percentage point cheaper, you may find the long-term savings well and truly exceed any termination penalties involving your current loan.



• Even if you’ve been making monthly mortgage repayments for many, many years, don’t get complacent by ignoring the marketplace.
  Stay informed. Otherwise, opportunities might pass you by that would otherwise have saved a fortune.