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

Sport
German supporters (left) and Argentina fans
world cup 2014Final gives England fans a choice between to old enemies
Arts and Entertainment
Armando Iannucci, the creator of 'The Thick of It' says he has
tvArmando Iannucci to concentrate on US show Veep
Life and Style
Pepper, the 3ft 11in shiny box of circuits who can tell jokes and respond to human emotions
techDavid McNeill tests the mettle of one of the new generation of androids being developed in Tokyo
Arts and Entertainment
A still from the worldwide Dawn of the Planet of the Apes trailer debut
film
PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Four ski officials in Slovenia have been suspended following allegations of results rigging
sportFour Slovenian officials suspended after allegations they helped violinist get slalom place
News
14 March 2011: George Clooney testifies before the Senate Foreign Relations Committee during a hearing titled 'Sudan and South Sudan: Independence and Insecurity.' Clooney is co-founder of the Satellite Sentinel Project which uses private satellites to collect evidence of crimes against civilian populations in Sudan
people
Arts and Entertainment
Balaban is indirectly responsible for the existence of Downton Abbey, having first discovered Julian Fellowes' talents as a screenwriter
tvCast members told to lose weight after snacking on set
Life and Style
More than half of young adults have engaged in 'unwanted but consensual sexting with a committed partner,' according to research
tech
Life and Style
A binge is classed as four or more alcoholic drinks for women and five or more for men, consumed over a roughly two-hour period
tech
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Programme Support, Coms, Bristol, £300-350p/d

£300 - £350 per day + competitive: Orgtel: My client, a leading bank, is curre...

(Junior) IT Systems Administrator / Infrastructure Analyst

£28000 - £32000 per annum + pension, 25 days holiday: Ashdown Group: A highly ...

Finance Officer

Negotiable: Randstad Education Birmingham: Randstad Education are seeking a Fi...

Accounts Payable

£12 - £15 per hour: Cameron Kennedy Recruitment: Excellent opportunity to join...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice