Paying off your home loan ahead of schedule can slash thousands of dollars off your long term interest bill. Take a look to see how you can save – and become mortgage-free faster.
1. Make repayments more frequently
Instead of paying monthly, try paying half your regular repayment each fortnight. There are 26 fortnights in a year, so you’ll end up paying an extra month’s repayment without feeling the pinch.
Let’s say for instance, your monthly repayments are $2,000. Over 12 months you’ll pay $24,000 off your home loan. But if you pay $1,000 each fortnight you’ll have repaid $26,000. It’s an easy way to knock an extra $2,000 off your loan.
Similar results will be seen with weekly repayments.
2. Add a bit extra to your repayments
Even small extra repayments can have a big impact over time. That’s because additional payments come straight off your loan balance. This lowers the interest component of next month’s repayment, so more of that payment reduces your loan balance. It’s a simple way to swing the loan pendulum in your favour.
3. Tip lump sum windfalls into your home loan
Almost all of us receive lump sums of cash at some stage – usually a work bonus or annual tax refund. Put this money to work by depositing it into your home loan. It will come straight off the principal, letting you see the good progress you’re making.
4. Consider an offset account
A home loan offset is an account linked to your mortgage. The balance of this linked account is deducted from (or offset against) your home loan when loan interest is calculated. It’s a smart way to use your spare cash to get ahead with your mortgage. For added convenience, the funds in the linked account are normally available at-call.
5. Bundle your loan into a package
We all want across-the-board savings, and a package loan can offer just that. By bundling a number of financial products with the same lender – usually your home loan, a credit card and a transaction account, you can typically save on a variety of fees, and, most importantly, enjoy a lasting discount on your home loan interest rate.
6. Stay on top of money matters
It pays to sweat the small stuff. A missed bill, an overdrawn account and even falling behind on your rent can leave a few dents in your credit score – yet this is one of the best assets you have to secure competitively-priced finance.
Aim to stay on top of money matters to protect your financial reputation and avoid the cost of unnecessary fees and late payment penalties.
7. Go easy on the nice-but-not-essentials
Money saved by sidestepping unnecessary buys can be used to pay down your home loan sooner. That doesn’t mean living on bread and water. Rather it involves thinking about what you really need, identifying non-essential purchases and embracing ways to save.
8. Consider an investment property
What? How does getting into more debt repay my home loan? Here is our proven technique on how this can help you save years of your home loan
9. Speak to your local Mortgage Choice broker
Having the home loan that’s right for your needs and budget is essential to get ahead with your mortgage. After all, it’s a lot harder to pay off your loan sooner if you’re paying for features you don’t use or need.