You could save thousands by reviewing your home loan and targeting the three essential mortgage reduction components:

1. Interest rate

It is exciting to think that by paying an extra $200 per month off a $400,000 home will reduce the amount of time it takes to pay the loan off by 5 years and save $74,000 in interest. What’s not as obvious is that reducing your interest rate can be just like paying extra off your loan. You can get the savings but you don’t have to pay any extra.

2. Structure

Every dollar you earn needs to be working against your home loan. Having your income work directly against your home mortgage instead of in a savings account is imperative. You can think of it as an investment with a guaranteed return (see the figures below).

A Savings Account V’s An Offset Account
Savings account rate example = 3% Home loan rate example = 5%
Tax on savings = 30% Tax on savings = 0%
Annual return on income = 2% Annual return on income = 5%

This example represents a far superior return on your money if your money is working against your mortgage using an offset account instead of in a savings account.

3. Other People’s Money

If you like the idea of getting double the return on your savings then you need to ensure that you collect as much money as possible to work against your home for as long as possible.

For example:

  • Use the bank’s money to pay all your bills each month by using their credit card.
  • Have all your business and investment income go into your offset account.
  • In addition to this get the government to pay all tax refunds to you in your pay during the year as opposed to waiting until you do your tax return.

Call Menzies Financial to start fast tracking your debt reduction today. We help Australians realise their dreams of owning their home sooner. Here are just some of the ways we can help you with your home loan:

  • We take the time to understand all your needs with a free Financial Health Check before we talk home loans.
  • If you’re client of ours, you have access to a free Home Loan Health Check whenever you want one.
  • We know how important a good deal is to you, that’s why we search for the best deal for you. Save up to 1.4% p.a. on the standard variable rate.