Saving a small fortune

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YOU can save thousands of dollars and cut years off your home loan by employing a few simple techniques. Fortnightly repayments and offset accounts could make a big difference to a loan's life. "Armed with a few simple strategies, you can be on the way to owning your home sooner," "However, before you start imagining yourself as mortgage-free, you need to ensure your loan provides enough flexibility to take advantage of these interest and time-saving techniques." For example, some financial institutions might put a limit on the annual amount you can contribute above standard repayments or there may be a penalty for early loan repayment. The simplest and most effective way to pay off your home loan sooner was to pay as much spare cash into your mortgage as possible. "By making extra repayments you will not only reduce the loan principle but also the total amount of interest you pay," she said. She said even an extra $10 a week could make a significant difference over the life of a loan. Another alternative was making more frequent repayments. "Because interest on home loans is calculated daily, halving your monthly repayments and paying fortnightly can help you to repay the loan faster," she said. "On a loan of $250,000 at a rate of 7.37 per cent calculated to be paid over 30 years, this could result in you owning your home seven years earlier." Interest offset accounts could also save money and years, with deposit accounts directly linked to mortgage accounts, so the interest was only calculated on the value of the mortgage less any deposits you may have in your deposit account. The first was to pay lump sums off the principle, which would not only clear the loan quicker but also can be seen as a "pretty good investment". "This effectively gives you a return on the 'invested' lump sum equal to your mortgage rate tax-free," the report says. Another tip was to ask your financial institution if you were eligible for a low-rate so-called 'professional package'. These could include fee-free transaction or credit card accounts, discount insurance, financial advice and other relationship benefits. Maintain repayments at their current level - or higher - when interest rates fell. Some traps to watch out for included fees like exit and establishment fees, being wooed by honeymoon rates that reverted to higher variable rates after a short period, and being lured into a new loan. http://www.news.com.au/adelaidenow/story/0,22606,21444466-5006367,00.html