Some of the most expensive costs associated with owning a home are automated and occur out of sight, making it all too easy to underestimate their financial impact.
To save potentially hundreds of dollars a year, it is worth paying close attention to the following three factors, all of which are easily comparable online.
Choosing a home loan is a decision that can alter your financial future by literally tens of thousands of dollars.
The two main elements to consider are the provider’s fees and rates, and whether the product suits your lifestyle.
If changing from an existing loan, you need to determine how much interest you’re likely to save by switching per month, then multiply this by the remaining loan term in months. Be sure to include any additional costs such as exit, break and start-up fees in this equation.
“For instance, if you can save $50 a month in lower repayments, but it’s going to cost you $2500 to switch [existing and new lender costs], your payback period is $2500 divided by $50, which equals 50 months or four years and two months,” says independent financial expert Peter Boehm.
“You need to assess whether this is worth doing, especially if there is scope for your new lender to raise interest rates during this period which could wipe out your monthly savings.”
A professional mortgage broker or comparison website can help consumers make an informed decision about switching.
“A difference of just 0.53 per cent can save nearly $55,000 in interest over a 30-year loan term,” says Marion Mays, property investing mentor from Thalia Stanley Group.
“Those figures are staggering and really impact homebuyers, which is why it is so important for them to do their research and find the best interest rate and conditions, such as redraw facility, flexibility of repayments and offset.”
Your energy supplier
While it is relatively easy to switch your electricity provider about half of Australian households have never made a change. Photo: Robert Rough
Prices between different energy providers can vary significantly, posing huge potential savings for consumers.
You can view the rates and benefits associated with multiple energy suppliers via a comparison website, and for those in states with competitive energy markets, it’s possible to find a better deal in minutes. (Tasmania and the Northern Territory only have one electricity retailer each, and there is limited variation in products in Western Australia and some parts of Queensland.)
Many providers do not stipulate lock-in contracts, making it easy for consumers to switch as they like. It’s also common for providers to coordinate the switching process on your behalf, meaning there is no work required or costs to consider.
Despite the ease in switching, about half of Australian households say they have never switched retailers or plans, according to the latest Energy Consumers Australia’s Consumer Sentiment Survey.
Running your appliances off-peak can considerably cut down your energy bill.
It’s not just your energy provider that affects the cost of your energy bills, but also the appliances these service.
The Energy Rating Label is a government-regulated initiative enabling consumers to compare the energy efficiency of appliances before buying. The more stars an appliance has, the more savings it offers.
The way appliances are programmed and used can also have a significant financial impact.
Aim to turn devices off at the wall when not in use, keep the air conditioner set upwards of 22 degrees and make sure appliances are in good working order.
“If your electricity plan is based on ‘time of use’, one of the most effective ways to reduce running costs is to run your appliances during off-peak times,” says Simone Poulter, co-founder of MyNextAdvice.
“Most new appliances feature a delay start function so you can set your washing machine or dishwasher to run after you’ve gone to bed.”
Ensure your home is well-insulated, as this can also cause excessive energy use restoring lost heating or cooling.
“Also consider whether you need the air conditioner and turn on the fan instead. A 3kW air conditioning unit can cost roughly 30¢ per hour to run, whereas a 30W ceiling fan costs roughly 1¢,” Poulter says.