When was the last time you looked at your mortgage? For many of us, it’s in the too-hard basket. However, according to CommBank home lending executive Eva Ie, checking in on your home loan each year is key to achieving your financial goals. “Your income or financial situation may change and this helps make sure you’re still on track with your repayments,” she says. So, rather than going with a set-and-forget mindset, Ie says these are the smart strategies that will make your money work harder.
1. Leverage the power of your offset account
One of the easiest ways to lower the amount of interest you pay on a mortgage is to have an offset account. This is a transaction account linked to your mortgage. “Every day we look at how much you owe us and how much you’ve got in your offset account and then we calculate the interest on the difference,” says Ie. “Let’s say you owe $500,000 and you have $50,000 in your offset account—you’ll only be charged interest on $450,000.”
Think it’s not worth putting your income into the offset because you spend it anyway? Think again. Interest is calculated daily so it can still have an impact. “You don’t use all the money straight away and every day it’s in there makes a difference,” says Ie.
Eligible CommBank home loans allow multiple offset accounts, which means you can set up your money in a way that works for you. “Some people like to separate their money into accounts for transactions, bills, holiday savings and their kids—all of these can be linked to the mortgage so every dollar you have is offsetting the home loan,” she says. “Don’t underestimate the power of offset.”
2. Chat to your lender
There are plenty of reasons to refinance your home loan but the most common one is to get a lower interest rate, reducing how much you pay in the long run. A good place to start: chat to your lender to find the best fit for you. Are you getting the best rate for the services being offered? What loan features do you really need? Some digital-only loans, for example, offer fewer features but may have lower rates.
Perhaps you need help with cost of living pressures. “If you’re struggling and can’t keep up with repayments, consider refinancing to extend your loan term,” says Ie. “Even though it’ll take longer to pay off, at least it gives you some relief.”
There’s also a misconception that refinancing your home is hard to do. “Refinancing is actually easy—it can be completed within days if it’s a straightforward application.”
