Monday May 4 2020

Five things you can do right now to reduce your mortgage costs



If you have a mortgage and have lost your job or income in the last few weeks, we can probably find you breathing into a paper bag right about now. We get it - these are stressful times and while our natural instinct might be to panic, it’s important that we stay as calm as possible. With every lender offering financial hardship support and government support available, you don’t need to hand the keys over just yet. In fact, the person you should be talking to is a mortgage broker. So, let’s jump straight into five practical ways to reduce your mortgage costs right now.


1. Review your rate

As we love to say at Pure Finance, your mortgage and interest rates should never be set and forget. Anytime, but especially now, it’s important to make sure that the amount of interest you’re paying is as low as it can be. For those with a variable rate, that means asking for a rate review and negotiating it down, without having to change banks or loan products. Currently, variable rates are hovering between 2 and 3% for most lenders, so if your rate is higher than this, a rate review might provide some much-needed savings relief to get you through this period.Simply contact your current bank and tell them you want a better deal. If you have a fixed rate loan, things are a little more complicated (though, not impossible) and, while you can't technically have your fixed rate reduced, in some cases it might be worth breaking your fixed period and looking into a loan refinance. More on that next...


Did you know that as a Pure Finance customer, we already do this every year on your behalf, without you having to ask? And, even if you’re not yet a customer, we can do a free rate review for you too - just get in touch with us here


2. Change to a cheaper loan product

If a rate review didn’t provide the level of relief you need right now, it might be time to switch to a cheaper loan product. Right now there are very low variable and fixed home loan products available on the market. So, what could this mean for you? It could mean moving to a cheaper product at your current bank (say, from a variable rate to a fixed one) or, it might mean switching to a new bank altogether. 

For those currently with a variable rate wanting to move to a fixed rate, this is relatively painless and could result in some immediate savings. For example: if you have a $600,000 loan with a variable interest rate of 3.5%, and you switch to a new fixed rate of 2.5%, then you will save $6,000 per year in interest or $500 per month. On the other hand, if you’re wanting to switch from a fixed rate to a variable one, you’ll most likely have to pay a fee (a break cost) for ending the fixed term early. Now, in some cases it can be worth it to get yourself onto a cheaper product that will provide both short and long term relief. Of course, you’re best to talk to your mortgage broker ( ‍♂ ‍♀️ ‍♂️) about what’s best in your situation because, while it’s not always true, cheaper might be better right now. 


Dive deeper into the pros and cons of fixed vs. variable interest rates with Pure Finance’s guide to Fixed Rates 101 here



3. Top up your loan amount to provide you with a cash buffer

While this won't necessarily 'reduce' your mortgage costs, a cash buffer might be useful to help you weather this period of uncertainty while you’re assessing your options. If this sounds like you, then it might be time to increase your loan and get some breathing space for the next 6-12 months. You can do this by contacting your bank directly, or give us a shout and we’ll do it for you (for free!). We’re currently seeing this take about four weeks from application, so keep that in mind if you need the cash straight away. And remember, you can always take this opportunity to look at other lenders offering better deals! 


4. Use your offset account to its full potential

If you have a loan with an offset account, now is the time to ensure you’re putting as much of your cash in there as you can, so you are paying less in interest. Considering the hit that savings accounts have taken with the recent cash rate reduction, right now it’s better for any savings you have to be sitting in your offset account. Plus, you can easily get the money back out again if you need it.


5. Press pause or swap your repayment type

If all else fails to provide the relief you need, it might be best to just hit the pause button. All major lenders are offering a six month pause on loan repayments, with some providing six months upfront and others providing an initial three months with the option to extend for a further three months. A few important things to keep in mind if you want to press pause on repayments:

  • You can still make repayments on your loan 
  • You will still accrue interest on your loan
  • It is confidential between you and your lender so it will not affect your credit rating (in fact it’s better to pause if you can’t make payments rather than go into arrears, because that will impact your credit history)
  • It may take anywhere from one week to three weeks for the repayment pause to take effect, depending on your lender 

Alternatively, if you didn’t want to press pause completely - you can look at swapping your repayment type to interest-only repayments or look at moving to minimum repayments (if you haven’t already) to temporarily increase your cash flow. 



We hope these five strategies to reduce your mortgage costs have helped to ease the financial burden of losing your income due to COVID-19. The most important thing to remember right now is: don’t panic - help is available. And, we are here to make sure you get through this difficult time with your mortgage (and sanity) intact. 


To chat through your options or get help reducing your mortgage costs, give us a call on 1300 664 603 or send us an email. We’re here for you 🙂








The finance information contained in this article is general advice only. You should consider your own circumstances or reach out if you'd like to discuss your individual needs.

Share this
Previous All articles Next