Home loan Tips
Always make a budget

One of the first things you should do when you're starting to look at property is work out what repayments you'll be able to afford - in other words, work out a monthly budget. Add up you're total monthly after tax income, including wages/salary, regular overtime, dividend/interest payments, rental income and any other sources of ongoing regular income. Then work out your average monthly expenses, including other loan repayments, credit card repayments, vehicle expenses, medical expenses and any other regular ongoing expenses. By subtracting your total monthly expenses from your total monthly income, you should get a rough idea of what level of repayments you may be able to afford. Of course, the figure you come up with may not necessarily be the same as what the lenders will say you can afford, but it is a good starting point, and will allow you to start looking at properties in a realistic price range.

Building Inspections

Once you've found a property you're interested in, you want to make sure there's no little surprises that are going to show up after settlement. Make sure your sale contract is subject to whatever inspections you think are necessary. A building inspection and a pest inspection are a must. You may also decide to get the property surveyed. If the inspections uncover any problems, you then have the option of backing out of the purchase, or negotiating with the vendor to either fix the problem or reduce the contract price.

Make repayments more often

One of the best ways to reduce your interest charges and pay of your loan faster is to make your repayments more frequently. Instead of making monthly repayments, try to make them fortnightly. This helps in 2 ways. Firstly, because there are 26 fortnights in the year, you will actually end up making the equivalent of 13 monthly repayments. Secondly, as interest charges are generally calculated daily and accrued monthly, the more often you make payments during a month the lower the accrued interest will be. On a 25 year loan for $300000, making fortnightly repayments would reduce your loan term by 4 or more years.

Maintain your repayments when rates drop

If you're lucky enough to see the interest rates drop while you're repaying a home loan, try to maintain your repayments at the level they were before the rate drop. The extra repayments will come directly off the principal loan amount, helping you pay off your loan sooner and reducing your total interest charges.

Manage and monitor your loan with internet banking

Many lenders today have Internet Banking facilities, allowing you to access your home loan details over the internet. At the very least you should be able to check your home loan amount and view your transactions (payments and interest charges). Some lenders may have other Internet Banking features, such as allowing you to make lump sum repayments or set up periodic repayments and view how far your payments are in advance.

Home Loan Tips
Put spare cash on your home loan early

If you have spare cash available, and are thinking of putting it on your home loan, it is better to do it sooner rather than later. Because of the nature of compound interest, the earlier you reduce your principal the better - repaying a few extra dollars early in your home loan could save you thousands over the life of the loan. If you think you might need those extra repayments back at some time in the future, make sure your home loan comes with a redraw facility.

Look for package deals

Many lenders will now offer you a financial package to try to secure your business. The package may include fee free transaction accounts or credit card accounts, reduced rates on insurance, or free financial advice. It pays to ask your lender or your broker if these types of packages are available.

Consider non-conforming loans

If you can't get a loan through the major lenders, there are alternatives. Non-conforming and low doc loans are now being offered by many non bank lenders, catering specifically to borrowers who are perhaps self employed or have a poor credit history. Often these loans will have a higher interest rate than standard, but if you're on time with your repayments for a couple of years the rate may be reduced, or you could possibly refinance.

Look for rebates and grants

First home buyers in particular will find a number of rebates and concessions available when it comes to paying the fees and duties (particularly stamp duty) on settlement day. There is also the federally funded First Home Owners Grant, while some states also offer grants. You lender or broker should be able to advise you on what rebates or grants you may be eligible for, or you may wish to contact your state's Revenue Office for more information.

Reduce the principal

Unless you are paying off an investment property, you will probably want to pay off your loan as quickly as possible, and one of the best ways to do this is to make an immediate impact on your principal loan amount. In the early stages of your home loan, you will not be making much of a dent in your principal loan amount if you stick to your minimum repayment amount. However, any extra amount you can repay above your minimum will come straight off the principal, and although it may mean tightening the purse strings in the short term, in the long term you stand to save thousands (sometimes hundreds of thousands) in interest payments and knock years off your home loan.