Getting a home loan is an exciting time – there’s nothing like coming home to a house that you can call your own. It’s important not to let the thought of paying it off dampen your excitement though. While the payments can be a big commitment, that doesn’t mean they’re insurmountable.
Creating good habits that help you save on your repayments and pay them off more quickly is a great way to feel confident about your home loan. By using everyday round up, taking advantage of an interest offset account, and finding savings from your other day-to-day expenses, you can say goodbye to a lot of home loan stress. Just remember none of these are a quick fix, but they provide a great advantage to help you take some of the edge off your repayments and save in the long run.
Interest offset accounts
An interest offset account is a separate transactional account that you can link to your home loan. If you already transfer your savings into a separate online savings account, this one will come naturally to you.
If you choose to round up your Orange Everyday, every card purchase will help to directly reduce your outstanding home loan balance. However, choosing to keep more money in your Orange Everyday offset account, you’ll have a higher amount to offset against your loan balance when calculating interest. Whichever way you choose – round up or interest offset – your funds are still available to use if required. So you could start paying down your Orange Advantage today while living it up.
The balance of your interest offset account is subtracted from the amount you have left to owe for the purposes of calculating interest, thereby reducing the amount of interest you need to pay on your home loan. So, for a 100% interest offset account, if you have a $100,000 mortgage and $5,000 in an interest offset account, you’ll pay interest only on $95,000.
Round up your day-to-day purchases
One way to make more frequent payments to your loan is ING’s everyday round up. It allows you to round up your card purchases on your Orange Everyday to the nearest $1 or $5, with the extra amount going straight from your Orange Everyday towards your Mortgage Simplifier or Orange Advantage.
By using everyday round up to round up your everyday purchases, from coffees to groceries, helping to pay off your home loan can happen in the background of your lifestyle in small and incremental repayments. You don’t have to buy things more frequently, it’s about taking advantage of your regular card purchases. These regular payments could mean that you will end up paying off your overall home loan sooner and cheaper.
For instance, customers that round up to the nearest $5 on purchases made with their Orange Everyday card save on average $65 each month. On a 30 year owner occupied Mortgage Simplifier home loan of $350,000 (with a loan to value ratio of less than 80%), rounding up $65 each month over the full term could help you pay your loan off 24 months sooner and save up to $18,000 in interest based on the current variable interest (and when making minimum principal & interest repayments).*
What’s more important though, is the peace of mind that you’ll get from knowing you’re always working towards paying off your home loan, just by going about your day.
Make room for repayments
Looking into your consistent spending habits will allow you to see areas that you can cut back on to contribute more to each of your repayments. For instance:
• Look into your home and contents insurance policy – does it cover you for things that aren’t relevant to you? If so you could cut these out and contribute the savings to your home loan. ING’s Home and Contents insurance allows you to customise your insurance based on your lifestyle.
• Check your monthly subscriptions. Is there potential to share your Netflix account with a housemate, or find a cheaper gym membership? These will be small savings, but can really add up in the long term.
• Try adjusting your budget technique to make sure you always have some extra money to pay down your repayments faster. You can name your accounts after your different day-to-day spending categories.
Important things to know
* This is an example only and the potential benefits from using everyday round up with a Mortgage Simplifier home loan will depend on a range of factors including how much you round up each month and the nature of your home loan with ING. The current variable interest rate for an owner occupier Mortgage Simplifier home loan of $350,000 with an LVR <80% when making principal & interest repayments is 3.73% p.a.. Variable interest rates will likely change over the term of the home loan which will alter the benefits from using everyday round up. The average amount rounded up into a Savings Maximiser from 1 October 2017 to 30 September 2018 was $65 for ING customers using everyday round up to round up card purchases to the nearest $5. The information contained in this example does not constitute financial or tax advice. ING recommends you seek independent financial or taxation advice where appropriate.
With Everyday Round Up – A round up will not be debited if doing so would reduce your Orange Everyday balance below $20. Any advice on this website does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. All applications for credit are subject to ING’s credit approval criteria. Fees and charges apply. Before making any decision in relation to our products, you should read the relevant Terms and Conditions and Fees & Limits Schedule available at ing.com.au. If you have a complaint, please call us on 133 464 at any time as we have procedures in place to help resolve any issues you may have. Products are issued by ING, a business name of ING Bank (Australia) Limited ABN 24 000 893 292 AFSL and Australian Credit Licence 229823. ING recommends you seek independent financial or taxation advice where appropriate.
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