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24 Mortgage Tips and Tricks

Skip the honeymoon
Beware of lenders bearing gifts. Introductory or honeymoon rates have long been an
important marketing tool for lenders. You are initially offered a cheap rate on your loan to get
you in the door but once the honeymoon period is over, the lender will switch you to a higher
variable rate of interest.
There are two problems with this scenario. First, the variable rate is often higher than some of
the lower basic loans available so you could end up paying more. Second, you need to
clearly understand that a honeymoon rate applies only for the first year or two of the loan
and is a minor consideration compared to the actual variable rate that will determine your
repayments over the next 20 or so years.
You may also be hit with fairly steep exit penalties if you want to refinance in the first two or
three years to a cheaper loan. So make sure you fully understand what you are letting
yourself in before setting off on a “honeymoon” with your lender.
Make repayments at a higher rate
A good way to get ahead of your mortgage commitments is to pay it off as if you have a
higher rate of interest. Get a loan at the lowest rate you can and add 2 or 3 points to your
repayment amount. So if you have a loan at about 7 percent and pay it off at 10 percent,
you won’t even notice if rates go up. Best of all, you’ll be paying off your loan quicker and
saving yourself a packet.
Pay it off quickly
Time is money. There are all sorts of strategies for paying less interest on your loan, but most of
them boil down to one thing: Pay your loan off as fast as you can. For example, if take out a
loan of $300,000 at 7.07 percent for 25 years, your repayment will be about $2,134. This
equates to a total repayment of $640,126 over the term of your loan.
If you pay the loan out over 10 years rather than 25, your monthly payment will be $3,494 a
month (ouch!). But the total amount you will repay over the term of the loan will be only
$419,290 Ï saving you a whopping $220,836!
This e-book was built to help you on your success journey, by the team at