Tips & Ideas for Saving Your Money, Time and Resources – Top Money Saving Ideas for Australians

Apply for loans at online banks like Onedirect and UBank. These online lenders are owned by the big four banks and therefore are just as secure, however charge much lower rates and fees than loans offered under the standard big four brands. The online channels incur much lower overheads and these savings are passed on to the end customer. The main difference from the customers view, is that you end up talking to their staff over the phone instead of face-to-face, and there are limited features on some of their online products.
For owner-occupied variable loans, do use an offset account. Have your main income streams deposited directly into this offset account, and utilise this like a normal transaction account, only drawing out money when required. With offset accounts, any balance you have in your offset account reduces the principal balance on your home loan and therefore your interest. This is much more valuable than placing your income in a savings account. With savings account, firstly you are paid less interest, secondly this is taxed. For example with a $5,000 pay packet deposited in a term deposit for 1 year earning simple interest at 3% would earn you $150 interest income, and this is taxed at your personal tax rate, assume 30% therefore you end up pocketing only $105. If you placed this in an offset account where your home loan is charging 6% simple interest, you would have paid $300 less interest and no tax on this amount.

Do make additional repayments as often as possible. This reduces the principal on your loan and hence the dollar interest you have to pay for the life of your loan. Some home loans like fixed rate loans will have restrictions or charges you a fee for making early repayments. You will need to check with your bank.
Continue to make repayments at similar $ value when rates are falling or a low. Don’t reduce the amount your repay when rates fall, as you will end up paying off your entire loan quicker and save a huge amount on interest repayments.
Consider the total cost of borrowing, not just the interest rate. Mortgages have a lot of fees attached and vary significantly on features as well. Most banks have Comparison Rates which is fees plus interest to allow the consumer more transparency in comparing loans. For example most home loans have monthly fees, as well as annual fees. Some home loans have restrictions on switching loans or redraws, so if this is a feature that you are likely to use then this home loan is not for you.

Have more frequent mortgage principal and interest repayments. eg fortnightly instead of monthly. This reduces your principal slightly earlier each time and therefore you pay less interest. Over the life of your loan this makes a huge difference to the savings in interest repayments.
Shop around for home loans and use mortgage brokers. Most brokers do not charge for their services as they receive commission from the banks, and they can offer very competitive rates, if not more than through a big 4 bank branch, as they have larger negotiating power with the big banks, than you would have. Websites that are great for comparing home loans include: http://live.moneymanager.com.au/home-loans and www.infochoice.com.au/home-loans/home-loan-interest-rates.aspx

Ask for fees to be waived. Do not be afraid to ask for fees to be waived, especially home loan application and monthly account keeping fees. It is common for home loan lenders and mortgage brokers to accommodate these requests to win your business. If they don’t move on to someone who will.
Apply for a basic variable loan, not a standard variable one if you just want the basics. If you will not be using features like redraw, take up a basic loan as it comes with less fees and lower interest.
Packaged fees are valuable for using same bank for multiple services. With most packaged fee deals you pay an annual fee of around $400 and you do not have to pay any account keeping fees nor annual fees on your home loan or transaction accounts, gold credit card fees, discounts off insurance and you get reduced interest off your home loan, personal loans, credit cards and margin loans, depending on the bank. However some banks require a minimum loan amount before you are eligible for a packaged fee service.

Every 3 or 4 years shop around and consider refinancing your home loan with another bank. There are possibly better deals out there that you can switch your loan to. It is not recommend to do this every year as all banks charge early pay out fees (eg. Early termination fee, Discharge fee, Settlement fee, Stamp duty) which is quite substantial (these fees should be detailed in your home loan contract but may have changed so contact your bank for the most current details). Most banks will try and match or beat whatever offer you have been given by a competitor bank to retain your business.
Inquire with your bank, about your switching costs. Similar to the above point, call your bank once every few years to inquire about switching costs and to let them know that you are looking. Some banks will offer you a better rate just by knowing that you are looking around.

Never terminate a fixed interest loan early. Avoid terminating a fixed interest home loan before the fixed period is completed as banks charge exorbitant penalty fees for this, especially during an increasing interest rate environment. These penalty fees are supposedly to cover the banks costs of the change in funding movements, however due to lack of transparency, there are usually other margins involved.
Lock in a lower rate. If interest rates are on the way up and your current home loan has not completed its current fixed rate term, try locking in the current lower rate by paying a lock-in fee. Basically you lock in the current lower rates, for a certain period of time for loan home loan, so when it expires it gets fixed for another term on to this locked in rate.

Be wary of products with “honeymoon discounted rates”. Some home loans offer for the first year or so, lower rates but when the honeymoon period expires it reverts to banks standard rates and may come with restrictions like high termination and switching fees if you decide to switch loans then.
Use line of credit attached to mortgages. Some home loans allow you to have a line-of-credit which enables redrawing funds at anytime towards personal expenditure like holidays, buying shares, new car or motor home. Where possible use this option rather than taking out a Personal Finance Loan, which usually comes with much higher interest rates and additional fees, than your home loan. It is much simpler to manage for yourself too, having less loans accounts. You will however need much discipline.

Pay-off your principal residence first and borrow the maximum on your investment property. If you have two properties, a principal residence and an investment property, make minimal repayments on your investment property as most interest you pay on this is tax deductible, and divert your repayments to your principal home as these are not deductible.
Live with your parents or rent a room for as long possible to help you save for a deposit towards a property. Financially you are likely to be better off if you buy an investment property and lease it out as you can tax deduct your costs such as water, council rates, interest rates, and get rental income as well. Alternatively buy a property to live in yourself, but rent out the excess rooms to help fund your property.

For investment property loans, switch around from prepaying a full year of fixed interest, to variable interest, to standard fixed interest. If you derived a lot of income in the current tax year from say capital gains from selling shares or a big bonus, prepay a full year of fixed interest on your investment property. By doing this you can deduct 2 years of interest payments in the current year – note it would mean you won’t be able to deduct for this in the next financial year. If you think interest rates are going to go up, switch to a fixed home loan and freeze your rates now. If you switch home loans with the same banks, there is usually only a switching fee involved, which is a lot less than paying full suite of exit fees if you switch banks, or if you took out a packaged fee with your loan, you can usually switch for free.

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When selling one home to buy another, see if you can avoid refinancing. Some home loans allow you to move house (eg sell one property and buy another), without having to refinance, hence saving you application and other set up fees.