A new home loan often requires a detailed loan budget plan, which is included in our comprehensive First Home Buyers Guide. Having the maximum deposit that you can save will reduce the size of your loan principal amount or your mortgage, which will drastically reduce the amount of interest that you will be charged. Furthermore, not only will a solid deposit offer interest savings. It will also offer other savings, in ensuring that the borrower will not need to expend any money on Lenders Mortgage Insurance (LMI). LMI is usually a requirement of loans with smaller deposits and a loan-to-valuation ratio (LVR) in excess of 80% of the property value.

Also, if your home loan allows it, extra repayments will also reduce the amount of interest paid on your loan.
To illustrate this effect, you may find our extra loan repayments calculator helpful.

Avoiding Potential Traps in new Home Loans

• The loan with the lowest interest rate is not always the best loan. Some borrowers will try to lure borrowers in with “honeymoon interest rates”, which will rapidly rise once the honeymoon period is over.
• While fixed-term home loans may offer some protection from rising interest rates, they usually do not allow for extra repayments. This means that while you may save on interest, you are unable to put any extra money towards your loan to reduce the affect of interest.
• Exorbitant fees can often turn out to be more expensive than a slightly lower interest rate, eating into any potential loan repayment savings.
• Make sure you will use all the features that are a part of the loan. There is no use paying for something along with increased interest or fees, which is not required.
• Remember to take into account the other costs of the home loan: – stamp duty, conveyancing, cost of inspections, loan application fees when working out what you can afford.

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