15 Simple Tips to Pay Off Your Home Loan Faster
Want to pay off your loan sooner so you can enjoy a stress-free life doing the things you love? Financial freedom is easier to achieve than you think. The 15 simple tips below could help you save thousands of dollars in interest and potentially cut years off your loan term.
Choose what works for you and see the difference it could make to your finances.
1. Get a loan with an offset account
Home loans with a linked offset account can save you substantial interest. Your savings in this account will reduce the balance of your loan before interest is calculated, thus saving you interest. Leave your funds in here for as long as possible and withdraw when you need it for expenses.
2. Make frequent repayments
Move to weekly or fortnightly loan repayments instead of monthly. The more frequent your payments, the sooner it will reduce your principal loan amount. You’ll pay less interest in the long term, as interest is usually calculated daily on your loan balance.
3. Make a budget and stick to it
Budgeting can help you plan your repayments and keep your spending in check. Daily coffees, eating out, netflix – budgets are a great way to find areas where you can save money to put towards your home loan instead. Try our online Free Budget Calculator
4. Avoid taking on more debt
A little bit of determination goes a long way when it comes to repaying your mortgage early. Don’t take on more financial commitments such as personal loans, credit cards or long phone contracts which means you will have less money to put towards your home loan.
5. Make extra repayments
Putting in a little bit extra every time is a great way to get ahead with your loan payments. Wondering how much time and interest you could save with extra payments? Try our online Free Repayment Calculator
6. Salary credit into your loan account
Have you wages paid directly into the offset account linked to your mortgage. That way it’s working for you from day one, offsetting against your loan balance and saving you interest.
7. Resist the temptation to redraw
A redraw facility is handy because it lets you access the extra funds you have put into your loan, when needed. But redraw too often and it just counteracts the benefits of leaving these funds in your loan – all the interest you will save.
8. Use BPAY to automate repayments
The best way to avoid missing repayment dates and late penalty fees is to schedule them in advance using BPAY. Convenient and easy to set up, BPAY is a secure way to ensure your payments are always paid on time. That will also curb impulsive spending.
9. Direct your lump sum payments into your loan
Got a sizeable tax return or Christmas bonus? Great! Put that into your loan, that way you won’t be tempted to go on a shopping spree. The more you can put away into your loan, the less interest you’ll be paying and the faster you’ll pay off the loan.
10. Refinance for a better deal
Give your mortgage a regular health check. Your home loan may have been a good deal when you started, but you can probably shop around and find even better rates. Or talk to your Lender if you’re happy with them and they may be able to offer you a better rate.
11. Take advantage of low interest rates
Don’t change your current repayment if the rates go down and the extra you pay will put you ahead over time. If the rate goes up, it may not make a huge difference to you as you are already making extra repayments.
12. Look at ways to increase your income
Finding a new source of income with a second job or landing a better paying job can help improve your financial situation. Putting your extra income towards your home loan can help reduce the amount owing very quickly.
13. Become money smart
Build some good habits, go shopping with a list to prevent impulsive spending, use only your bank’s ATMs and avoid ATM fees, pay your bills on time and never pay late fees. Better planning will save you money that can go towards your loan.
14. Check for upfront and ongoing fees
Checking if your lender has any fees or limits for additional payments into the loan is the first step in trying to pay your loan down faster. In addition, check that there are no penalties for paying out the entire loan ahead of schedule.
15. Consolidate your debts
While there are different ways to consolidate your debts, combining all your debts into your home loan remains one of the best options. It’s most cost-effective because you can take full advantage of the great low home loan rates, so you can pay off your debt quicker.
At Mortgage House, we’re no strangers to the homeowner’s journey. It’s a long (but rewarding) one.
But don’t worry, we can help with that.
If you’re thinking of buying a home, you can contact us for advice about the best options for you when it comes to your mortgage. The cost of your mortgage can drastically affect your financial planning, so it pays to speak to the experts about it.