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<p>Buying your first home can be both exciting and overwhelming – especially once the first mortgage bill comes through. However, for many buyers, the purchase of a property can be one of the most rewarding and valuable investments of their lives. If you've just bought your first property and are feeling nervous about the 20-30 year tenure of mortgage payments, we've compiled a simple guide with some tips that could help you to pay down your mortgage debt faster. </p>

<p>From negotiating new home loan rates to using an offset account or using savvy budgeting techniques, here are 23 ways you could secure a mortgage-free lifestyle sooner. </p>

<h2><strong>1. Purchase a home you can afford</strong></h2>

<figure><a class="colorbox colorbox-insert-image" href="https://res.cloudinary.com/dz9xllyip/image/fetch/q_auto:good/https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/shutterstock_1141644755_0.jpg" rel="gallery-all"><img alt="" class="image-article-full-width-580px" height="387" src="/s3/files/styles/article_full_width_580px/public/pictures/article-images/shutterstock_1141644755_0.jpg?itok=v0faBBD6" width="580"></a></figure><p>Look to <a href="https://www.urban.com.au/guides/how-much-should-you-spend-on-your-first-house-in-2020"><u><strong>purchase a home you can afford</strong></u></a>, as often you'll be required to attain prequalification first. Prequalification means your bank will investigate your financial circumstances and determine <a href="https://www.urban.com.au/guides/how-much-can-i-borrow-for-a-new-home"><u><strong>the loan that is most suitable for you</strong></u></a>. </p>

<p><em>Some questions to help determine whether you’re eligible or ready to take on a home loan are: </em></p>

<ul>
<li>Will you be debt-free for three to six months?</li>
	<li>Are you able to provide a 5%-20% down payment?</li>
	<li>Can you afford to take out a 15-30 year fixed-rate loan?</li>
	<li>Is the home repayment 25% less than monthly take-home pay?</li>
	<li>Are you financially able to cover the fee moving expenses and leaving your current residence? </li>
	<li>Can you afford the ongoing maintenance and utility bills for this home?</li>
	<li>Do you have enough funds saved for any emergencies? </li>
</ul>
<h2><strong>2. Consider refinancing your home loan</strong></h2>

<p>Renegotiating your current home loan rate with your mortgage lender, or shifting your home loan to a lender who offers a lower interest rate, may result in cost savings and could help reduce the tenure of your mortgage.</p>

<h2><strong>3. Consider an offset account</strong></h2>

<p>[smartcode_project:default project_id=7275]</p>

<p>An offset account is a savings or transaction account linked to a home loan account. The balance of the account is “offset” daily against the home loan balance, and therefore you are only charged interest on the difference between the total loan balance and the amount offset.</p>

<p>The money held within an offset account is not regarded as taxable income, as the account does not generate interest, which is beneficial for people who deposit large sums of money into the account.</p>

<p>Depositing money into the offset account with extra income from other sources of income such as bonuses and profits from investment can also help lower your interest repayments, as well as contribute to paying off your mortgage sooner. </p>

<p>Depending on the lender the money within the offset account also can be withdrawn twice or more in a year with <u><strong><a href="https://www.yourmortgage.com.au/home-loan-guide/redraw-facility-explained-with-tips-to-lower-your-mortgage/79077/">some lenders charging up to $50 per withdrawal</a></strong></u>. </p>

<h2><strong>4. Consider refinancing your home loan</strong></h2>

<p>Renegotiating your current home loan rate with your mortgage lender, or shifting your home loan to a lender who offers a lower interest rate, may result in cost savings and could help reduce the tenure of your mortgage.</p>

<h2><strong>4. Keep your credit card debts manageable </strong></h2>

<figure><a class="colorbox colorbox-insert-image" href="https://res.cloudinary.com/dz9xllyip/image/fetch/q_auto:good/https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/screen_shot_2020-02-07_at_4.26.48_pm.png" rel="gallery-all"><img alt="" class="image-article-full-width-580px" height="383" src="/s3/files/styles/article_full_width_580px/public/pictures/article-images/screen_shot_2020-02-07_at_4.26.48_pm.png?itok=0n7kFOF7" width="580"></a></figure><p>Aim to clear your credit card of debt each month, as the interest rates on your credit cards and personal loans are often much higher than the interest rate on your home loan. When you pay on time, you avoid paying extra interest or late fees and also help keep your credit score healthy.</p>

<p>Personal Loan: A personal loan sits between a home loan and a credit card loan, and provides a faster and easier process than taking out a mortgage. Unlike a credit card loan, to access the personal loan, you are also required to sign a formal contract. </p>

<p>Credit Card Rate: A credit card's interest rate is the price you pay for borrowing money. The interest rates, known as the annual percentage rate (APR) are stated as a yearly rate. With a credit card, paying interest on purchases can be avoided if the balance is paid in full each month by the due date. </p>

<p>Hire Purchase: Hire purchase is an arrangement for buying expensive consumer goods, in which the buyer provides an initial down payment and pays the balance plus interest in instalments. Hire purchase agreements state that the ownership of the merchandise is not officially transferred to the buyer until all the payments have been made.</p>

<h2><strong>5. Split your loan </strong></h2>

<p>You may choose to split your loan in half, with a portion fixed, and the rest variable. </p>

<p>A <a href="https://www.urban.com.au/guides/how-to-choose-the-right-home-loan"><u><strong>fixed-rate home loan</strong></u></a> ensures your loan repayments are charged at the same interest rate for the length of your loan period. If the loan is not repaid by the end of the period and you choose not to enter another fixed-term contract, the rate is reverted to a variable interest rate. </p>

<p>A <a href="https://www.urban.com.au/guides/how-to-choose-the-right-home-loan"><u><strong>variable interest rate</strong></u></a> is a loan where the interest rate charged on the outstanding balance fluctuates as market interest rates change. </p>

<p>To successfully split your loan in half you can contribute through fortnightly payments, a method which gives homeowners a sense of security as fixed payments will remain constant while variable payments will see interest rates rise and fall.  </p>

<h2><strong>6. Make repayments at a higher rate </strong></h2>

<p>[smartcode_project:default project_id=2439]</p>

<p>People that choose a loan which is set at the lowest interest rate available can add <a href="https://www.yourmortgage.com.au/home-loan-guide/24-ways-to-get-the-mortgage-monkey-off-your-back-faster/77843/"><u><strong>2-3 points to the repayment amount</strong></u></a>. For some, this may not make a drastic difference to their bank balance. </p>

<p>A good idea could be to align repayments with your pay cycle, prior to setting the amount you wish to repay each month. </p>

<h2><strong>7. Research into smaller lenders as well as big banks</strong></h2>

<figure><a class="colorbox colorbox-insert-image" href="https://res.cloudinary.com/dz9xllyip/image/fetch/q_auto:good/https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/shutterstock_425326012_1.jpg" rel="gallery-all"><img alt="" class="image-article-full-width-580px" height="387" src="/s3/files/styles/article_full_width_580px/public/pictures/article-images/shutterstock_425326012_1.jpg?itok=xkgYwL2C" width="580"></a></figure><p>There was <a href="https://www.domain.com.au/money-markets/why-borrowers-are-turning-away-from-the-big-banks-863960/"><u><strong>a period in 2019</strong></u></a> where homeowners were turning away from four major banks [in Australia] in favour of smaller lenders, as they provided more competitive rates. </p>

<p>Small lenders have been found to sometimes compete more persistently for your business and provide more personalised service. These companies may also offer home loan options such as longer loan terms, lower ongoing fees and lower interest rates. </p>

<h2><strong>8. Switch lenders </strong></h2>

<p>Finding a home loan at a lower rate can help you save money. However, always make sure to do your research before switching lenders or loans types. Always make sure to understand the rates and features of the loan, and don't be afraid to tell lenders the exact portion of your income you're prepared to allocate to mortgage repayments. </p>

<h2><strong>9. Find a package deal </strong></h2>

<p><a href="https://www.canstar.com.au/home-loans/packaged-home-loans/what-is-a-package/"><u><strong>Package deals</strong></u></a> or package home loans combine home loans and financial products, which can provide fee waivers for a transaction or offset accounts. Sometimes banks may waive annual credit card fees, provide discounts on insurance, discounted or free financial planning sessions and even discounted share trading. </p>

<h2><strong>10. Watch out for lenders who offer gifts </strong></h2>

<p>[smartcode_project:default project_id=6798]</p>

<p>Introductory rates are commonly referred to as ‘honeymoon rates’, as lenders can try to convince homeowners to select a lower rate for a period of 1-2 years. Although once the honeymoon period has ended or the lender switches to a high variable rate of interest, the person is expected to pay for a much larger rate over the next 20 years. </p>

<p>Some lenders may also charge costly cancellation penalties for those who opt-out after utilising the honeymoon rates. Don’t be afraid to discontinue business with a lender who is no longer giving you the best service available. </p>

<h2><strong>11. Portable loans can make moving house easier</strong></h2>

<p>The average home loan is between 25 to 30 years, which is why it is quite common for people to move house whilst still paying off a loan. If you decide to move houses, a portable loan on your existing house that carries to your new property, can save you the inconvenience of refinancing. However, you should be aware of the regulations around buying and selling homes, as there may be <a href="https://www.urban.com.au/guides/how-much-does-it-cost-to-sell-a-house-or-apartment"><u><strong>additional charges for the old house</strong></u></a> and the <a href="https://www.urban.com.au/guides/top-10-hidden-costs-of-buying-a-house-or-apartment-in-2021"><u><strong>establishment for the new house</strong></u></a>.</p>

<h2><strong>12. Pay all your mortgage fees and the charges upfront </strong></h2>

<figure><a class="colorbox colorbox-insert-image" href="https://res.cloudinary.com/dz9xllyip/image/fetch/q_auto:good/https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/shutterstock_701873641.jpg" rel="gallery-all"><img alt="" class="image-article-full-width-580px" height="387" src="/s3/files/styles/article_full_width_580px/public/pictures/article-images/shutterstock_701873641.jpg?itok=AzmNqrWE" width="580"></a></figure><p>When paying your mortgage fees upfront, it is sensible to pay with the money you already have, rather than borrowing money from the lender to pay fees and charges. </p>

<h2><strong>13. Pay your first instalment before it's due</strong></h2>

<p>The first instalment of your home loan may not be due for a month after the settlement. If your lender allows, you may be able to pay your first instalment on the settlement date, which can secure your position ahead of the lender for the term of your loan. </p>

<h2><strong>14. Pay off the principal</strong></h2>

<p>Every mortgage repayment you make attacks the capital which helps you pay a smaller amount of interest. <a href="https://www.urban.com.au/guides/how-to-choose-the-right-home-loan"><u><strong>You may want to avoid interest-only loans</strong></u></a>, as paying interest on your loan for a set period may result in the principal amount being charged at a higher propensity interest-only period.</p>

<h2><strong>15. Use your equity</strong></h2>

<p>[smartcode_project:default project_id=4939]</p>

<p>Equity is the difference between the current value of your property and the amount you owe the lender. If you have already paid a percentage of your home loan, then you would have equity. Some lenders will allow you to borrow money using your equity as collateral. <a href="https://www.urban.com.au/guides/how-does-equity-work-in-property"><u><strong>Using equity to improve your property</strong></u></a> also helps increase its value in the long run. </p>

<h2><strong>16. Discover what you could be entitled to</strong></h2>

<p>Some lenders <a href="https://www.homeloanexperts.com.au/waived-lmi/"><u><strong>may offer discounts and special conditions</strong></u></a> to those from specific professions, such as certified medical professionals. In these cases, a lender may waive or lend at a higher loan to value ratio before charging a Lenders Mortgage Insurance, which may provide you with a significant head start on paying off your loan.</p>

<h2><strong>17. Keep ahead of the game</strong></h2>

<p>Check the status of your <a href="https://www.urban.com.au/guides/how-to-choose-the-right-home-loan"><u><strong>home loan</strong></u></a> each year, as well as new home loan offers that you could be applicable for. <a href="https://www.urban.com.au/guides/housing-market-effect-on-wealth"><u><strong>Keeping yourself knowledgeable</strong></u></a> about this will help you to maintain a competitive mortgage rate, and avoid overpaying interest. </p>

<h2><strong>18. Budget</strong></h2>

<p>When trying to save money, a budget is a good way to organise your finances, balancing your home loan repayments as well as household bills. This will also help determine how much disposable income you have left over.</p>

<h2><strong>19. Know how much you’re spending on luxury items</strong></h2>

<figure><a class="colorbox colorbox-insert-image" href="https://res.cloudinary.com/dz9xllyip/image/fetch/q_auto:good/https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/shutterstock_507639565_0.jpg" rel="gallery-all"><img alt="" class="image-article-full-width-580px" height="348" src="/s3/files/styles/article_full_width_580px/public/pictures/article-images/shutterstock_507639565_0.jpg?itok=_2hu2Qoo" width="580"></a></figure><p>Keep a budget so that you can identify what you spend most of your earnings on. Perhaps limiting dining at a restaurant or cafe to once a week, and instead, cook meals at home. Reducing your power usage, changing energy providers and upgrading your old appliances can be a great way to ensure your home is more energy-efficient, which will also result in lower power bills. Avoid purchasing low-quality items that are likely to need replacing. For more tips on how to save money, <a href="https://www.urban.com.au/guides/how-to-buy-a-house-in-2020-a-guide-for-first-time-home-buyers"><u><strong>check our article</strong></u></a> about how you can save for a house deposit in a year. </p>

<h2><strong>20. Using gifted money towards your loan</strong></h2>

<p>If you receive any bonuses at work, cash gifts or inheritance and you’ve opted for a variable interest rate, then you could consider allocating a portion of the amount for your mortgage payments. </p>

<h2><strong>21. Rent out your home/spare rooms on Airbnb</strong></h2>

<p><a href="https://www.urban.com.au/guides/breezybnb-chooses-urban%E2%80%99s-5-best-brisbane-apartments-for-airbnb"><u><strong>Listing your home on Airbnb</strong></u></a> can be a great way to bring in some extra funds. Money earned from listing your home can also be put towards your loan repayment. Listing your home while you're away is also a great way to ensure your home is always occupied.</p>

<h2><strong>22. Use your tax refund</strong></h2>

<p>[smartcode_project:default project_id=22057]</p>

<p>Your tax refund can be a great way to make a bulk payment on your home loan. For those that choose to lease their home, the ongoing rental property cost <a href="https://www.urban.com.au/guides/18-ongoing-rental-property-costs-and-which-ones-are-tax-deductible"><u><strong>may be tax-deductible</strong></u></a>.</p>

<h2><strong>23. Seek additional work</strong></h2>

<p>Working a second job if possible, is a great way to save money quickly. Look for work with flexible hours, or casual opportunities that will fit around your schedule.</p>
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Olivia Round

How to secure a mortgage-free lifestyle sooner

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<p>With subdued and stagnant incomes, more Australians are feeling strapped for cash, and are being forced to dip into their savings to cover the rising cost of living expenses, ME’s latest Household Financial Comfort Report (HFCR) has revealed.</p>
<p>Empty nesters (50 years old and over) reported a record low in financial comfort.</p>
<p>“You may think that empty nesters would have fewer financial worries – most have paid off their mortgage, their kids have flown the coop, the majority are still working and some have voluntarily retired," consulting economist for ME, Jeff Oughton said.</p>
<p>"However, many are still concerned about current finances as well as worried about their life after work, expressing an 8% drop in comfort with their expected standard of living for retirement, as well as a 7% fall in their ‘comfort with savings’.</p>
<p>"Recent changes to superannuation in the past year appear to be significantly impacting this life stage."</p>
<p>The report also pinpointed students reporting a substantial decline in financial comfort of 15% to 4.18 since the last report.</p>
<p>“Students are always among those with the lowest financial comfort in each HFCR due to a lack of comfort with cash savings, investments, net wealth and their reduced ability to manage a financial emergency," Oughton said.</p>
<p>"However, this recording is a major negative spike and can be attributed to falls across most components that make up the Household Financial Comfort Index, in particular ‘level of debt’, ‘comfort with living expenses’ and ‘confidence in the handling a financial emergency’.</p>
<p>Oughton said more households are overspending to cover necessary living expenses and are drawing down on savings, with mortgage and rental stress remaining high.</p>
<p>“Comfort with short-term cash savings was the most notable component of the Household Financial Comfort Index to decline, seeing a 3% decrease to 4.93 out of 10 during the first half of 2018 – its lowest level in a couple of years.”</p>
<p>The report showed that households’ confidence to raise money for an emergency dropped three points below the average since the survey began, and fewer households reported they are saving. The estimated amount that Australians are saving each month decreased by just over 10% during the first half of 2018.</p>
<p>More Australians are also overspending – households who ‘typically spend all of their income and more’ increased 3points to 11% during the six months to June.</p>
<p>“Clearly, this is a potential tipping point. At the moment, Australians generally can dip into their savings to get by. However, some households may get to a point where there’s no more savings to draw from.</p>
<p>"Currently, around a quarter of Australian households have less than $1000 in cash savings,” Oughton said.</p>
<p>“If we see big negative shocks in the coming year, whether they are higher loan rates or an international trade war, then a lot more families will suffer increased financial stress.”</p>
<p>The latest report found that the cost of necessities continues to be the major financial concern for households, with more than half of households reporting it as their ‘biggest financial worry’, up seven points to 53% in June 2018.</p>
<p>Similarly, when asked why their financial situation worsened during 2017– 18, 44% of households said it was due to the cost of everyday items, an increase of four points since the previous report.</p>
<p>Consistent with ABS wage data, the latest HFCR data found nearly half of households (42%) still had the same income as a year ago, while a quarter (24%) reported income cuts and 34% received a raise. Unsurprisingly, ‘comfort with income’ declined in the past year by 2% to 5.61.</p>
<p>Oughton said similar to strengthening in the ABS jobs data, the report revealed increased confidence in people’s ability to find a job; however, high levels of job insecurity and underemployment remain. Around 23% of casual and part-time workers said they would prefer to undertake full-time work if they could.”</p>
<p>In the six months to June 2018, the report’s overall Household Financial Comfort Index went sideways from 5.49 to 5.44, once again indicating that the financial comfort of Australian households is not advancing.</p>
<p>Mortgage and rental stress still high, despite the housing market cooling.</p>
<p>The report revealed housing stress is still prevalent among Australian households.</p>
<p>For those with home loans, a broadly unchanged 45% of households reported to be contributing more than 30% of their disposable income towards mortgages during the past six months – a common indicator of financial stress</p>
<p>"The good news for renters is that financial stress has lessened somewhat during the past six months, thanks to thehousing market cooling and rents falling. While almost three-quarters (72%) of renters were previously contributing over 30% of their disposable income towards rent, this number dropped significantly to two-thirds (67%) in the most recent survey,” Oughton said.</p>
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j.ballantyne1990-6AQqhLzZaK

Empty nesters feeling financial discomfort: ME report

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<p><span>Not only are more Australian parents giving their kids free handouts, they are failing to teach young ones how to work for and save money, a new survey by  comparison site finder.com.au has found.</span></p>
<p><span>The survey of more than 1,000 Australian adults found that while almost two in three Aussie kids (63%) are receiving pocket money – about 3.3 million kids aged up to 17 – only one in three of them (or about 1.09 million) actually have to do chores for their cash.</span></p>
<p><span>The state of our nation’s personal finances could be set to get even worse, as many parents who had to work for their childhood allowance are choosing to forgo this valuable lesson in their own parenting. Only two in five (42%) adults who had to do chores for their pocket money are now instilling these values in their kids.</span></p>
<p><span>The total cost of pocket money per child over the course of their childhood is $7,016 according to the finder.com.au study, with the average weekly allowance sitting at $9.30, or $483.60 a year per child.</span></p>
<p><span>Unsurprisingly, those children on the cusp of adulthood – aged 17 years – were found to be the most expensive age, costing their parents almost $800 for the year. Children aged 0-2 were receiving an annual average of $260 from their parents.</span></p>
<p><span>The study also found that parents were most likely to give their kids pocket money when they were aged 13-14, with 78% of parents doing so. As kids get older and start taking on part time jobs, the percentage of kids receiving pocket money decreases, dropping to 63 percent at 17 years-old.</span></p>
<p><span>The more children parents had, the less likely they were to give their kids pocket money with 60 percent of children with no siblings receiving an income, but only 34 percent of four-children households give their kids pocket money.</span></p>
<p><span>Michelle Hutchison, Money Expert at finder.com.au, said that there is a silver lining for parents looking to nurture good money habits in their children provided they give them the right tools.</span></p>
<p><span>"Teaching your kids the value of money from a young age is crucial to help them gain an understanding and respect for savings. Our research shows that not enough parents are proactive in teaching their kids the value of money on a regular basis by using bank accounts and pocket money for chores.</span></p>
<p><span>"Pocket money is a terrific way to teach kids how to value money but it's almost pointless without including conditions like doing chores and keeping the amount consistent.</span></p>
<p><span>“The finder.com.au research showed that children have been twice as successful at achieving a savings goal if they have their own savings account; We also found that kids who receive pocket money are more likely to have one. But there’s always room for improvement.Clearly the love of building savings begins young, so finding the right tools to spur their interest is vital.</span></p>
<p><span>“Giving a young one their own not only allows them to ‘play grown up’, it actually stimulates positive personal finance habits that will genuinely benefit their future selves.</span></p>
<p><span>"Pocket money doesn't have to be an expensive exercise – if you can teach your kids how rewarding it is to save up their money for a goal it will be even more meaningful."</span></p>
<p><span>Other findings from the finder.com.au survey:</span></p>
<ul>
<li><span>Kids who don't do chores may not only be missing out on learning the value of money, but they are likely to receive more than their working counterparts. Only 40% of kids who do chores were likely to receive over $5 per week, whereas 65% of kids who don't do chores received over $5</span></li>
<li><span>How do you make $260 a year without doing anything? Be an Aussie kid under two years of age. Kids up to two received an average of $5 a week</span></li>
<li><span>As kids age, their income tends to increase at 7.6% annually – that's compared to the average savings account rate of about 3%!</span></li>
<li><span>68% of parents surveyed received pocket money when they were a kid but 71% of which didn't have to do chores to receive it. About 1 in 3 parents who did receive pocket money didn't repeat the practice with their kids</span></li>
<li><span>Generation Y (aged 18-34) is the most likely age group to give their kids pocket money (54%). As parents age, the likelihood of giving pocket money decreases to 41% for Generation X and 37% for Baby Boomers who have children under 18.</span></li>
<li><span>27% of parents have not opened a bank account for their kids.</span></li>
</ul>
<p><span>State by State</span></p>
<ul>
<li><span>The state most likely to give their children pocket money is ACT (76%) followed by Tasmania (73%). Northern Territory kids are the least likely to receive pocket money (50%)</span></li>
<li><span>Of the parents who give their kids pocket money, Queenslanders were most likely to insist they do chores (52%)</span></li>
<li><span>NSW children are most likely to get pocket money for nothing, with only 15% of them being asked to do chores</span></li>
<li><span>Tasmanian kids are most likely to have a bank account (90%) followed by children from Victoria (77%)</span></li>
<li><span>ACT and NT kids are the least likely to have a bank account (67%).</span></li>
</ul>
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