There are many things that normal lay people would not know about home loans and the way they are laid out. The only main factor that benefits the customer ( us) is the home loan rates that the loan offers but behind the loan , there is the inner working of the loan that can also make a big profit for the bank rather than the customer.
Save on your loan Tricks and tips
The most important thing to understand on your loan that the bank wont tell you is that interest is calculated on a daily basis ( on that large loan amount you have ) and charge to the account monthly in arrears. So if you actually can save say $300 dollars a month extra or then just even a couple of dollars to put towards your loan ,y0u can reduce this daily balance and you can be thousand of dollars ahead over the term of your loan.
Example ( saving on Interest home loans and shortening the loan term ):
Say you got a $300,00 mortgage for a standard variable rate of 5.85 % over 30 years
You get a bit of extra cash or manage to save a extra $500 which you have now put towards the loan.
By doing this you would cut the overall term by one month and save almost $2400 in interest. Imagine the savings if you increased these extra amount repayments or then did the same every year
( Savings and terms of loan can vary based on bank terms and conditions and they way these amounts are calculated by each bank)
Similar Home loan savings can be got by also using offset accounts
A mortgage offset account is simply a savings account linked to your loan account. Over time, savings in your offset account can help to reduce the loan principal, allowing you to pay off your loan sooner or build up equity.
An example of an Offset Account
Peter and Shiela have a $300,000 mortgage and have a 100% offset account with total savings of $30,000.
This means that Peter and Shiela owe $300,000 towards the principal amount but will only have to pay interest on $270,000 of this as the offset reduces the principle upon by $30,000.




