Pay Off Your Home Loan Sooner

April 07, 2017
Owen McDonald

There are a number of ways to get ahead on your home loan without putting a dent in your budget.


1. Make more frequent payments

Most banks will set monthly repayments as the standard repayment time frame for home loans.  However, when asked, most lenders will allow you make more frequent repayments at no additional cost.  This is probably the single biggest action you can take to reduce the term of your mortgage.

Try matching your repayments with your pay cycle.  If you get paid fortnightly, make fortnightly repayments, or if you get paid weekly, make weekly repayments.  ( If you are making 26 repayments (fortnightly) or 52 repayments (weekly) you are reducing the outstanding loan balance more often).  This in turn will reduce the interest accruing on your loan.

2. Make extra repayments 

Most mortgages will also allow you to make additional repayments on top of the minimum repayments at no extra cost.  You can do this in big or small amounts:

  • Add a little extra on top of your usual repayment.  Give you the daily takeaway coffee or weekly night out and put it towards your mortgage.  (The health benefits will be outstanding also!!)
  • Deposit any large lump sum amounts straight into your mortgage.  These can include gifts, inheritance, tax refunds or share dividend payment.

3. Maintain your repayments when rates are low

Interest rates in the Australian market have been cut to historical lows.   With this in mind, try to maintain your repayments at the higher pre-cut repayment amount.  As this repayment is already part of your budget, you won’t miss the difference, and those extra contributions will give you a nice buffer when rates rise.  

4. Use an offset account

An offset account is a savings account that is linked to your home loan account.  It works by subtracting or ‘offsetting’ the balance of that savings account against your home loan.

For example, on a $400,000 mortgage with $75,000 in an offset account, you would only pay interest on the balance of $325,000.  This simple action will greatly reduce the total interest paid over the life of your home loan.

5. Get a mortgage health check 

If it’s been a few years since you set up your home loan, it’s time to consider a check-up with a mortgage specialist.   As circumstances change in your life (such as additions to the family, a new job or a pay rise) different features may suit you better. 

6. Establish good habits early

As you pay the most interest early in your mortgage, look for ways to get ahead on your loan in the early years.   The quicker you start to pay off the principal, the less interest you’ll pay over the life of the loan. 

Also, use online calculators to see how additional repayments are benefiting your position – you will be surprised to see how much those extra repayments have saved you!


Come in for a chat!


Regardless of your current situation, your home loan expert Owen McDonald from Mortgage Choice South Brisbane will help you evaluate your options and guide you on your journey towards becoming a home owner.


Posted in: Home loans

Contact us today.

Additional Comments? * :