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?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'