Money: Pay more on your home loan and save a fortune

The term "Australian Mortgage" is usually used to refer to loans where the interest you owe is re-calculated on a daily basis rather than once a year. However, if you take a closer look at how the Australians run their home loans you'll find they have lots of other money-saving ideas that British borrowers can easily copy - and save thousands of pounds in mortgage interest payments.

Pay fortnightly

Thousands of Australians cut the cost of borrowing by paying their mortgage fortnightly. Ask your lender if it will let you pay every other week rather than once a month. Then you simply divide up your usual monthly payment and pay half that amount each fortnight. This can make an extraordinary difference because there are 26 fortnights in a year, but only 12 months, it is equivalent to making 13 monthly payments a year. This can cut the length of a loan by three years.

Pay at a higher rate

With UK interest rates at their lowest for years, you can get ahead on your mortgage by playing a psychological trick on yourself. Switch from a standard variable-rate loan to a cheaper flexible or fixed-rate loan but continue to pay off the loan as if you are still on the old rate. This has two advantages. If rates stay low, you will be overpaying and reducing the cost of your mortgage dramatically. If rates do start to edge up, it won't be a shock to your finances.

Use your equity

Equity is the difference between the current value of the property and the amount you owe your lender. Flexible loans allow you to draw back this equity instead of getting personal loans. If you have paid off your whole mortgage, an equity release loan allows you to use the equity in your house to get secured loan rates, which can be substantially cheaper than ordinary personal loan rates.

Get lenders to pay

If you are thinking of remortgaging, you will find plenty of deals where the lender is prepared to pay some of the cost of switching your loan, such as valuations or legal fees, or discounted home insurance.

Reduce debt

Most lenders will allow you to make one-off or regular overpayments. If you are with a lender that re-calculates once a year, time the overpayments so the money goes in just before the calculation.

Consolidate

If you opt for a flexible or "all in one" mortgage, you can save thousands of pounds by consolidating your borrowing in with your mortgage. Mortgage rates are the cheapest on the market, usually half those of personal loan rates, a third of credit card rates and a quarter of overdraft rates.

Moving tips

A useful trick is to forego the month gap that often occurs between completing a mortgage and paying the first installment. By insisting to your lender that you make the first payment as soon as your loan starts, you will always be a month ahead and the first payment will earn you a saving of mortgage rate interest for the rest of the term.

Avoid bridging loans

Avoid short-term loans at all costs or you can find yourself paying high rates and running two loans side by side. Get heavy with your solicitor and lender to synchronise your sale and purchase - it's far cheaper.

n Adrian Webb is marketing manager at Virgin One.

FLEXIBLE MORTGAGE DEALS

Flexible offers

n Egg, 0845 600 0290. Variable rate: 5.99%. No MIP, free valuation, free legal fees or pounds 200 for remortgages.

n Woolwich, 0845 607 6666. Fixed rate: 5.65% (to 1.8.04). No MIP. Fee: pounds 295.

n Standard Life Bank, 0845 845 8450. Discounted rate (six months): 4.55%. No MIP, refund of valuation, pounds 200 or free legal fees on remortgages.

Current account mortgages

n First Active Financial, 0345 743743. Rates currently 6.24%-6.74%. No MIP and free legal fees for remortgages.

n Virgin One, 0845 800 0001. Rates 6.35%-6.95%. No MIP and free legal fees on remortgages.

Source: Moneyfacts

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future