Given the choice, most people with a home loan would prefer if it were paid off sooner rather than later. And with good reason. Paying off your home loan sooner not only means you own your home sooner, it can also save you thousands in interest. So, how do you do it?
Choose the right home loan
The easiest way to pay off your home loan faster is to make sure you have the right loan for your needs. That means choosing the loan with the lowest interest rate and shortest term possible. It could also mean choosing the loan with the features you need (at the lowest possible price). Features such as an offset account, an option to make extra repayments, and a redraw service.
Make extra repayments
Choosing to make extra repayments – on an ad-hoc and regular basis – can help to pay down the principal on your loan faster and save you a substantial amount in interest. Try to put away extra on top of your regular repayments, and whenever you get a windfall, such as a tax return or a work bonus, invest that in your mortgage too.
Don’t lower your rate
Even if your lender lowers its standard variable rate, keep your mortgage repayments at the same level. Think about it, if you could afford to pay it before, you can afford to pay it now – and those few extra bucks on your mortgage repayment can make a big difference in the longer term.
Keep your savings in an offset account
The savings in your offset account can accrue at the same level of interest as your home loan’s interest rate. Any funds in your offset account are also offset against your home loan, allowing you to pay less interest on your loan. For example, if you have $20,000 in your offset account and a loan of $350,000, you will only pay mortgage interest on $330,000.
Arrange to have your salary paid into your offset
If you have an offset account, arrange to have your income paid into it. You can take funds out of your offset account as needed, but while those funds are sitting in the account, they are helping to cut down on the amount of interest you pay on your home loan overall.
Align your mortgage repayments with your payday
It can also be a good idea to align your home loan repayments with the day you get paid. If you get paid fortnightly, arrange to pay your mortgage fortnightly. Again, this can help to cut down on the amount of interest you pay on your mortgage.
Pay starting fees and charges upfront
If possible, try to pay legal fees, establishment fees and if required, Lenders Mortgage Insurance (LMI) upfront rather than rolling them into your loan, and paying interest on them over the length of the loan. It could save you thousands.
Review your home loan regularly (something people forget!)
In the competitive world of home loans, lenders are always looking to set themselves apart from the crowd, by offering something that other lenders aren’t. Review your home loan on a regular basis to ensure it is still meeting your needs. Compare other loans on the market and consider switching if it’s worthwhile, but be sure to take into account any fees and charges that may be applied.
A 0.25% saving on a $500,000 Home Loan can save you more than $29,000 over the life of your home loan*. We can review this for you, for free with just 4 pieces of information from you… see here
Lend Me – Home Loan Brokers – Mortgage Brokers – Perth, Western Australia
*Savings calculated on a 30 year loan term. These examples are actual client cases that had specific situations and needs, our responsible lending process will apply in all cases. See our credit guide for further detail.