Everyday spending changes that can help your home loan

Key takeaways

More than 90% of Australian homeowners expected the first rate rise in May 2022 – and had started taking steps to help deal with higher costs.

Switching to a yearly home and contents insurance payment could save you hundreds of dollars.

An offset account helps reduce the amount of interest you pay on your home loan.

Keep your essential expenses separate from your balance for other spending.

Use a budgeting tool or expense-tracking app to see how you spend your money.

Rising interest rates and living costs can make paying off a home loan feel a bit harder in 2022.

There’s a reason for this: the average homeowner was set to pay almost $2,000 more per year after the June RBA cash rate rise, according to the analysis from Finder.

On top of that, everything from energy prices to iceberg lettuces has surged in price, which puts even more pressure on households.

The silver lining is that many people expected these changes and have started taking action.

In fact, research from CommBank found that more than 90% of Australian homeowners expected the first rate rise in May 2022 – and had started taking steps to help deal with higher costs.

With more increases expected through 2022, here are 5 simple changes that can help make the difference between feeling stressed or confident about your home loan repayments.

Switch to yearly insurance payments

If you’re paying your home and contents insurance premiums every fortnight or month, switching to a yearly payment could save you hundreds of dollars.

It depends on the insurance company, but some of them do offer a slightly lower cost when you pay annually.

It’s the same with other types of insurance, such as private health or car cover.

Check with your insurance companies (or shop around) and see how much you could save.

Use an offset account with your mortgage

An offset account helps reduce the amount of interest you pay on your home loan because any money in it is weighed against the amount of money owed on your mortgage.

For example, if you have a $700,000 home loan and put $50,000 into an offset account, you would only be charged interest on $650,000 of your home loan.

If you don’t have a huge amount of savings, even a small balance in an offset account can help you save a little bit.

If you’re really committed to getting value from an offset account, you could even put your income into it and use a credit card to cover monthly expenses so that the offset balance is kept high for as long as possible.

Just make sure you always pay off the credit card by the due date on each statement to avoid even higher interest charges.

Time payments with your payday

Making sure you have enough money for bills and essentials can take up a lot more energy than necessary if everything is due at different times.

If you find it hard to keep track of what’s due when call your bank and other bill companies to see if you can adjust the due dates so that they are 2–3 days after you get paid.

This means you’ll get all the major payments out of the way and have a better sense of what’s left in your bank account between now and the next payday.

If you can’t change the due dates for certain bills, another option is to transfer the money to a second account – or even a savings account that could earn you a little interest while you wait for the due date to come around.

The key is to keep your essential expenses separate from your balance for other spending so that you know you can cover what’s needed.

Shop around for discounts

While the cost of almost everything has gone up, you can still find bargains.

Supermarkets and other retailers are still running sales – plus you can check prices online to decide on the cheapest place to buy what you need.

Beyond that, it’s worth checking if you have access to any discounted gift cards for essentials.

This is a benefit you can find with some memberships or accounts you already have.

For example, NRMA, AGL, and Employment Hero all offer different gift cards that can save you around 2–5% on the retail price.

Get one for your supermarket shopping, home improvements, or petrol (if you’re lucky) and that discount turns into another way to save.

Track your spending

This one is simple but often gets overlooked.

Use a budgeting tool or expense-tracking app to see how you spend your money and where you might be able to make changes to save a bit more.

There are so many different things that compete for our attention each day that it’s hard to know exactly where every dollar goes.

By taking note of it for a couple of weeks or a month, you can get clear on where it’s going and any opportunities you have for quick wins or valuable changes to how you spend your money.

With more interest rate rises forecast for 2022, every dollar really does count.

So whatever changes you can make now will help you keep your household budget as strong as possible.

Guest Author: This article was written by Amy Bradney-George, the credit card expert at Finder.

About Guest Expert Apart from our regular team of experts, we frequently publish commentary from guest contributors who are authorities in their field.