June 08, 2018 by Rebecca Crommelin
Paying off your home loan sooner can save you thousands of dollars in interest over the life of your loan.
Check out our 10 ways to get ahead on your home loan repayments – and help yourself become mortgage-free faster.
1. Make repayments more regularly
Instead of making payments monthly, try paying half your regular repayment every fortnight. There’s 26 fortnights in a year, so you will end up paying an extra month’s repayment without feeling the pinch.
Let’s break this down with an example, say your monthly repayments are $2,000. Over a 12 month period you’ll pay $24,000 off your home loan. But if you were to pay $1,000 every fortnight instead, you’ll repay $26,000. It’s a simple way to pay an extra $2,000 off your home loan.
2. Add a bit extra to your repayments
Even making small additional repayments can make a big difference over time. That’s because these extra payments come straight off your loan balance. This lowers the interest component of next month’s repayment, so then more of that payment reduces your overall loan balance. It’s a great way to make your home loan work harder for you.
3. Put lump sums toward your home loan
Most of us would receive lump sums of cash at some stage – perhaps a tax refund or work bonus. Make this money count by depositing it straight into your home loan. It will come directly off the principal, so you can see the great progress you’re making towards paying your home loan off.
4. Tap into redraw
Having a redraw facility allows you to withdraw cash from your home loan if ever needed for an emergency. This makes it more reassuring that you can deposit extra cash into your loan to help pay it off sooner, and still be able to access these funds if required.
5. Consider an offset account
An offset account is an account linked to your home loan. The balance of this linked account is deducted from (or offset against) your home loan when the loan interest is calculated. Having an offset account is a great way to use extra funds to get ahead with your mortgage. In addition, the funds in your offset account are generally readily available.
6. Utilise the benefits of a split loan
If you’re interested in taking advantage of record-low interest rates currently available but you’re not comfortable fixing your entire loan, then you should consider a split loan. It can offer you the best of both worlds, as it allows you to fix part of your home loan into a low rate while keeping the other part on a variable rate, so you can still benefit from the flexibility this offers.
7. Package up your home loan
Now, everyone wants savings across-the-board, and a package loan can provide this. By combining several financial products with the same lender – typically your home loan, a transaction account and a credit card, you can usually save on a number of fees. In addition, you’ll also enjoy a long-term discount on the interest rate on your home loan.
8. Keep on top of your money
Despite what many say, it can sometimes pay to sweat the small stuff. Missing a bill, having an overdrawn account or even falling behind on your rent payment can damage your credit score. This is one of the best assets you have to secure a competitively-priced loan, so it pays to treat it nicely.
That’s why you should always aim to keep on top of your money to protect your credit score and avoid the cost of late payment penalties and fees.
9. Keep the nice-but-not-essentials to a minimum
The money you can save by avoiding unnecessary purchases can be used to pay down your loan quicker. Now, that doesn’t mean living on the basics. Instead it would involve considering what you really need, determining non-essential items and taking advantage of ways to save.
10. Chat to your mortgage broker
Ensuring you have the right home loan for your needs and budget is crucial to get ahead on your mortgage. After all, it’s much harder to pay off your loan quick if you’re paying for features that you no longer use or need.
As your local mortgage brokers, we understand the market and know which lenders will best suit your situation. We can also find loans that offer the right interest rate and features for your needs.
We all want to be mortgage-free sooner. Chat to our team at Mortgage Choice in Joondalup on (08) 9485 0090 for the right strategy for you to get ahead on your home loan.
Read more of our tips on our blog
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