Thinking of packing up your life abroad and heading back to Australia? Exciting times! As you prepare for the big move, you’re likely sorting through a list of to-dos: finding a new home, tackling paperwork to exit your current country of residence, organising shipping, and, of course, managing your finances. Among these, dealing with your mortgage back home should be on the list – and the good news is that there are a few hacks to help make the transition a little smoother.

Let’s dive into three practical mortgage hacks that can make a big difference as you settle back into life in Australia.

1. Reduce Investment Mortgage Repayments and Increase Payments on Your Primary Home

If you’ve been renting out your Australian property while overseas, the mortgage repayments on your investment property have likely been a primary focus. But once you're back in Australia and ready to make that property you’re home again, shifting your repayment focus can be a smart move.

Investment loans often come with higher interest rates compared to owner-occupied ones. That means that whilst every extra dollar you put into your investment loan could be saving you more in interest than if you were channelling it toward your primary residence, it’s the tax benefits that we really want to consider. The interest on the mortgage for your primary residence is in most cases not tax deductible, whilst your investment loan is.

Why this works:

• Tax Deductibility: By focusing on your primary residence, you can maximise the tax deductibility of your debt, and pay down your loans faster as a result.
• Owner-Occupier Benefits: Many lenders in Australia offer better rates to homeowners occupying their property, especially if you’re living in it full-time. Taking advantage of these lower rates can help you save in the long run.

Talk to your lender or mortgage broker about adjusting your repayment structure, if possible. It could also be worth exploring whether you’re eligible to shift your loan to an owner-occupier rate.

2. Direct All Excess Income, Savings, and Emergency Funds to the Offset Account on Your Home Loan

Whether you’re a seasoned expat or new to the game of Australian mortgages, here’s a golden rule to remember: if you’re not using an offset account on your primary residence mortgage, you’re potentially missing out on a valuable way to cut down interest costs. There are cases where this doesn’t apply such as if your offset balance is below $10,000 approximately, but it’s important to crunch your numbers and assess what’s right for you.

An offset account is like a savings account linked to your home loan. Every dollar you put in it “offsets” the loan balance, so you’re charged interest on a smaller amount. For instance, if you have a $500,000 loan and $50,000 in your offset, you only pay interest on $450,000. Sounds good, right?

Why this hack works:

• Interest Savings: By building up a nice balance in your offset account, you effectively reduce the amount of interest you’re paying. For expats returning to Australia, every dollar counts, especially as you readjust to new costs and budgeting for life back home.
• Flexibility for Emergencies: Unlike making extra repayments directly into your loan, funds in your offset account are accessible anytime. You can tap into this money if you need to cover unexpected costs, handle an emergency, or even use it for investment opportunities. Think of it as an emergency fund that also keeps your mortgage costs in check.
• Boosts Home Loan Efficiency: Offset accounts are essentially a win-win; you keep funds handy for everyday needs while reducing interest costs on your loan.

To maximise your offset account, try to direct all “extra” money – like salary deposits, tax refunds, or any additional income streams – straight into the offset. The longer you leave money in there, the more interest you save. Consider setting up direct deposits to build this balance steadily and create a buffer that works for you.

3. Refinance to an Owner-Occupier Rate for a Lower Interest Rate

If you’ve had your primary residence as an investment property while you were overseas, refinancing to an owner-occupier rate upon your return could be one of the best decisions you make for your wallet.

Owner-occupier rates tend to be lower because banks see homeowners as lower risk compared to investors. Once you’re back living in your property, this gives you the perfect opportunity to secure a better interest rate and put those saved dollars towards other goals.

Why this is a game-changer:

• Lower Repayment Costs: With a lower interest rate, your monthly repayments shrink. This frees up funds for building savings, investing, or enjoying a few well-deserved luxuries after the big move.
• Boosts Equity Faster: Lower interest costs mean more of each repayment goes toward reducing the loan balance, helping you build equity in your property at a faster pace.
• Improved Borrowing Power: Having a lower-interest owner-occupier loan can improve your borrowing power for other investments, whether it’s a future property purchase or diversifying into other asset classes.

To take advantage of an owner-occupier rate, contact your mortgage broker to let them know you’re moving back into the property. Some lenders will offer this rate change without refinancing entirely, while others may require a new application. And if your current lender can’t offer a competitive rate, it may be worth shopping around – a mortgage broker can help compare options tailored to your new situation.

Making Your Move Home Financially Savvy

Returning to Australia is an adventure with plenty to juggle. Getting your mortgage optimised can set the tone for a smooth financial transition and reduce some of the pressures that often accompany the move. Here’s a quick recap of these three hacks:

1. Reduce Investment Repayments: Shift your focus to reduce repayments on investment loans and up the ante on your primary residence. This simple move can keep your costs lower and optimise your tax position.
2. Use an Offset Account: Direct all excess income and savings into the offset account on your home loan. This not only reduces the interest you’re paying but keeps funds accessible for emergencies or future investment opportunities.
3. Refinance for an Owner-Occupier Rate: Lower rates are typically available for owner-occupied properties. By refinancing or notifying your lender of your return, you could significantly reduce your interest rate, lower your monthly repayments, and free up cash for other needs.

Moving back to Australia is a huge step, and setting up your mortgage correctly is one way to start on solid financial ground. With these three mortgage hacks in your toolkit, you’ll be well on your way to making the transition smoother, cheaper, and financially rewarding.

Ally Home Loans Pty Ltd is your ally in finance for all of your home loan, investment property, business and commercial financing needs. With our wide range of lending solutions, expertise in financial planning and investment strategies, and extensive experience in working with both Australian residents and Australian expats, we are your partners for your lending needs.

Book an obligation-free, complimentary consultation here today.

Ally Home Loans Pty Ltd is an Authorised Credit Representative (Credit Representative Number – 494608) of My Local Broker (Australian Credit License – 481374). Important Disclaimer: Your complete financial situation will need to be assessed before acceptance of any proposal or product.