How to effectively manage your mortgage: Q&A explainer

Nathan Gooley
Feb 22, 2022
Yard Financial Pty Ltd | ACN 623 357 513 | Australian Credit Licence 509481

Table of Contents

Have a mortgage and want to manage it more effectively? 

You may not be using all the features attached to your current home loan, or you could benefit from switching or refinancing. Like any financial product, getting the most out of your home loan can help save you money and even mean you pay it off faster. This applies equally if you are a:

  • First home buyer about to take out your first mortgage, or 
  • Have an existing mortgage you want to make the most of.

Our Q&A explainer will give you a refresher of all the different home loan features you could be making use of, as well as some helpful tips on how to pay off your mortgage faster.

Let’s start by answering a few common questions about the different types of mortgages out there. 

Which home loan is best - a variable rate, split or fixed rate?

Overall variable or split rate home loans are more flexible and come with more features than a fixed rate mortgage. These features include the ability to make extra repayments, a redraw facility or an offset account - all of which can help pay off your loan faster. 

If your existing mortgage doesn’t meet your current needs you can refinance or switch to take advantage of more flexible and useful features. Contact your current lender to see if you can switch from a fixed rate to a variable or split rate home loan, or look into switching to another lender - provided you have worked out the total cost of a move.

You could also be paying more toward your home loan.

Can I make extra repayments on my home loan?

Yes, if you have the budget to put toward making extra repayments this is a great way of reducing the term of your loan. You can do this in two ways, by making:

  1. A one-off lump sum payment, like when you get money back from your tax return or from another type of windfall.
  2. An increase to your regular repayments which will reduce the amount of interest paid over the life of the loan. 

You will need to have a variable or split rate loan which typically allows extra repayments. If you have a fixed rate loan the terms could limit the amount of additional repayments you can make per year. You can also switch to fortnightly repayments, which means you make a payment every two weeks, which is effectively an extra month's repayment each year.

Tip: Use our mortgage repayment calculator for an idea to estimate your potential loan repayments on a new home loan. It will give you an estimate of your loan repayment, the total amount of interest you will pay over the life of the loan and the speed at which you will pay down the principal over the life of the loan.

You should also find out if you can get a better deal in terms of the interest rate attached to your loan.

Can I get a better interest rate on my home loan?

Yes, interest rates do change so you could either ask your current lender to give you a lower rate, or switch your mortgage to another provider. 

Just be sure to work out what the cost of switching to a new lender is. Start by calling your current lender and negotiating a better deal, which will be simpler than moving to a different provider. 

Now, let’s look at some useful features attached to home loans.

How can an offset account help me?

An offset account allows you to use your savings to offset the amount of interest you pay on your variable rate home loan.  

This helps you save on interest and reduce the term of your mortgage. You can deposit your salary and any savings into the offset account and the balance “offsets” daily against the amount owing on your home loan. You will be charged interest on the difference between your total mortgage balance and the offset account balance. Note that offset accounts are generally not available on fixed rate home loans, so you will need to have a split or variable rate home loan.

Tip: Use our offset calculator to calculate how much interest you could save on your home loan by keeping savings in your offset account.

Can I redraw funds from my home loan?

A redraw facility is a feature attached to a variable rate home loan that allows you to withdraw any additional payments you make, over and above the minimum payments required by your lender. 

Any extra repayments you make toward your home loan effectively reduces the total amount you owe on the loan. This means you pay less interest while shortening the term of your loan. 

Tip: We offer unlimited redraw on our variable rate home loan, with free redraws made via our online portal.

What is a loan top-up?

Over time you are likely to have built up some equity in your home, as you pay off the principal of your loan and the property increases in value. If you are on a variable rate loan your lender may allow you to ‘top up’ your mortgage, by lending you more money.  You can also top up your loan on a fixed rate loan, by setting up another loan split. This could be useful if you need funds to pay for a renovation or buy a car. Just note that by taking on more debt you will increase the outstanding balance, which will increase the interest on the loan. It could also increase your repayments if you do not extend the term of the loan. 

If you have any questions about our home loans please get in touch and our team will do our best to help you.

Co-Founder & Managing Director

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