How can I pay off my home loan sooner?

A little planning can go a long way towards paying off a mortgage faster says Andrew Heath of Mortgage Choice Richmond.

As a Richmond home loan expert, one of the concerns often raised by the first home buyers I speak with, is the length of time it can take to pay off a home loan.

It’s hard to argue that the standard loan term of 30 years can seem to be a daunting timeframe. But if the idea of committing to a mortgage spanning more than a quarter of a century is sending chills up your spine, rest assured, it’s possible to pay off your loan a lot quicker.

Three key strategies can help Richmond home buyers become mortgage-free significantly sooner and enjoy generous savings on interest charges. The best part? You won’t need to give up all of life’s luxuries.

Let’s see what’s involved.

Strategy 1 – Can’t pay more? Pay more often.

Paying half your monthly loan repayments each fortnight can potentially see you save big dollars on your Richmond home loan.

That’s because there are 26 fortnights in a year meaning you’ll make an extra month’s payment annually without feeling the financial pinch. Do check with the Mortgage Choice Richmond team that this is an effective strategy for you as different lenders calculate loan repayments in a variety of ways.

Strategy 2 - Sweat the small stuff

Making extra payments on your loan is a guaranteed way to pay off your loan sooner – and this applies not matter whether the additional payments are large or small. A single dollar each week can make a valuable difference over time.

If you can give up one daily cappuccino each week; take a bagged lunch to work a few days; or skip just one Friday night take away each month – and then put the money saved into your home loan, you’ll make valuable inroads into your Richmond mortgage. Not convinced? Check out the Mortgage Choice Extra Repayments calculator to see how your loose change can help pay off your loan sooner.

Strategy 3 – Use your loan like a savings account

Many home loans offer redraw – a feature that lets you withdraw extra payments out of your loan when the cash is needed. So if you’re a Richmond mortgage holder it can make sense to deposit any spare cash into your home loan, where you could save around 4% interest (or whatever your loan rate is), rather than earning around 3% interest on a separate savings account. Any cash deposited into your loan will help pay off the balance sooner.

The key issue is that as a Richmond home owner you have far more control over how long it takes to pay off your loan than many people realise. The term stated by the lender should typically be viewed as a maximum timeframe – not a figure that’s set in stone.

To discover more simple strategies to become mortgage-free sooner, call me, Andrew Heath at Mortgage Choice Richmond on 02 4578 9904 or drop by our office at Shop 1/37 Lennox Street Richmond, NSW.

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