5 Savvy Ways to Save on Loan Interest

When applying for a home loan, one of your priorities should be to secure the lowest interest rate possible. And when you get your home loan, you should do everything in your means to reduce the repayment term of the loan and interest that you pay. These and other steps will help you save a great deal of money in the long term that could be used elsewhere like renovations.

Saving on home loan interest

Experts agree that most would-be homeowners accept that their loans require a monthly payment that they have no way of influencing. However, this is not true, as there are some savvy ways you can consider to save on home loan interest:

Start with a Decent Home Buying Deposit

It’s wise to plan early and raise the biggest home loan deposit that you can comfortably afford before you decide to buy a home. Alternatively, you can also save up a big first payment while you’re waiting for the transfer to be processed. With a substantial deposit, you’ll save yourself money on monthly loan payments and be in a position to pay off your home loan much faster.

The bigger your loan deposit, the better your chances of securing a lower interest rate and reducing the total interest that’s charged on your loan. Keep in mind that interest is not the only monthly cost you’ll be paying. According to an ONQ Financial home loan payment breakdown, it’s important to understand PITI (Principal, Interest, Taxes, and Insurance) and how it influences your home loan repayment affordability.

Secure the Lowest Interest Rate You Can

Just like shopping for any type of loan, going for the lowest interest rate is highly advisable. Shop around for the best and most valuable home loan deals. While you can do this on your own, it’s more convenient to seek the services of a home loan expert who can present your home loan application in the best possible light to multiple home loan lenders and then negotiate on your behalf to secure the most favorable interest rate possible.

One of the biggest mistakes that most home buyers make is accepting a home loan from the mortgage lender that offers the biggest loan, with less regard for the amount of interest rate charged. Getting a lower interest rate on your home loan will save you a significant amount of money over your repayment term.

Extend the Term of Your Home Loan

Some home buyers consider taking their loan over 30 years rather than the standard 20 years. While this may increase your financial burden, it helps reduce your monthly repayments. Increasing the repayment term of your home loan is only a good idea if you’re struggling with affordability. Still, you should give the decision to extend your home loan term some careful thought. There are steps you can take before making this decision, according to The Nest.

Make Extra Repayments Whenever Possible

If you’ve taken an affordable loan which you will not struggle repaying on a monthly basis, it’s always better to try and pay as much as you can into your loan every month. Mortgage experts advise that you should pay a little bit more than your expected monthly repayment if you can, both at the outset and any time you have some extra cash that can go into repaying your loan.

Home loan repayment tips

Whether it’s an extra commission, a tax refund or an annual bonus, pay part of that additional cash into your home loan. By doing so, you get to gradually reduce the overall outstanding balance as well as the interest you pay. Make use of some online home loan repayment calculators to see what savings you’ll be making.

Talk to Your Loan Manager

The final step you can take to reduce the interest charged on your home loan involves your relationship with your bank or lender. Consider two options – one is about reducing your interest rate at some point down the line if you have a good credit history with the lender, and two, is discussing whether you can have a fixed interest rate for your loan if you’re willing to take the risk that comes with such an option.

At the end of the day, taking these simple steps will help you reduce the interest on your home loan and ensure a more affordable way to repay your loan while giving you peace of mind.