Saving money on your home loan isn’t easy, but it’s very worthwhile. The faster you pay it back, the less interest you pay. Additionally, there are some other tricks and tips that will have you saving more of your hard-earned money. Here are 7 ways you can save money on your home loan.
Increase Your Credit Score
The higher your credit score, the cheaper your loan will be! Lenders fees, and more importantly interest rates, are associated directly with your credit rating. Over the years, a few things have contributed to your credit score dropping. Not paying bills on time, credit card applications and more. What can you do to improve your credit score? There are a number of things you can quickly do before you start applying for loans.
Firstly, pay down your credit card balances if you have almost maxed it out. You should only be spending around 30% of the total amount on your credit card. Spending too much can hurt your credit score. Furthermore, get up to date with payments and pay them on time. Making payments on time helps your credit score. Additionally, never close your credit card account once you have paid it back, this removes a favourable mark on your credit report.
Don’t apply for new accounts or credit. This makes up 10% of your credit score. When you open a new account, your credit score will drop for a few months. If you are going to be applying for a loan, it’s best to save the new credit card application or car for after.
Use a budget
Saving money is all about spending less than you earn. You need to be aware of your financial position, this means you need to devise a budget. Most of us, including the top income earners don’t realise the implications of living above their means. They will expect things to change despite continually overspending.
As an example, a saving strategy you could use is meal preparation and planning. Plan your meals and shopping list for the week and stick to it. No impulse purchases and no going out for dinner that week. You can also minimise existing expenses such as your gym memberships, subscriptions, car repayments and anything else that isn’t essential.
Invest in your career
While this isn’t a strategy to save on your mortgage, it’s one that will make it easier to pay back. Your primary income is the most critical element when it comes to your home loan. This source of income will pay the majority of your loan. So, why not improve your salary? Easier said than done right? Well, there are few ways to go about this. Firstly, just ask! If you have been a faithful employee and worked hard, simply ask if you can be paid more. Alternatively, take some initiative and start learning more. Learning new skills will put you in a position to progress and earn more. Become a leader with the help of Upskilled and their flexible and cost-effective online courses.
Savings on your mortgage
Many families have one or two savings accounts while also paying off a mortgage. This means they are paying tax on interest earned from the savings account when they could be offsetting the higher interest cost of the mortgage. Now that banks and technology have progressed and we have more control and flexibility than ever, we need to take advantage of that. Instead of putting your savings in a separate account, why not save additional funds on your mortgage account? This will mean you can reduce your interest repayments and still have access to the money when you want.
Multiple sources of income
You don’t need to find a second job to have multiple sources of income. There are many ways you can start earning cash without the hassle. The sharing economy is the way to do it. There is so much more than Uber now. Got some spare storage space in your house? Spacer is a marketplace for space and people will pay you to use your storage. This means your house could be paying itself off. Alternatively, if you have a parking spot or garage that’s empty, you can list it on Parkhound and earn money.
Review your financials
People who are financially successful all have one thing in common. They always know exactly where they stand financially. They are always checking. This is in direct contrast to those who are considered financially unsuccessful, they have no clue. Always be reviewing your financial position. At no point should you be surprised about your situation? You must be aware of your income and expenses at all times.
Making an extra payment requires having more extra money. That’s why we discussed having multiple sources of income. This other income can go to an extra payment each year. An extra payment will be applied to your principal, not interest. Therefore you remaining balance drops and you will not have to pay interest each month on that principle for the remainder of the loan. Pretty good.
Without the right effort and dedication, it’s hard to achieve success. You must really strive to achieve your financial goals.