Pay off your Home Loan Faster
Who doesn't want to pay off their home loan as quickly as possible? The faster you pay your loan off, the less money you’ll be paying. If you can afford to increase the amount, and frequency of your payments, you could potentially save tens of thousands of dollars in interest.
While everyone’s circumstance will differ and professional advice is a must, these basic steps are a good place to start in getting that debt down.
Understand where you are at
Know where you currently stand: how much you owe and how much you can afford to increase your payments. Mortgage repayment calculators are a good place to start – You'll find plenty of calculators around the internet where you can plug in what you think you can pay and see what happens!
Halving your monthly repayment and paying every fortnight lets you pay 26 rather than 12 repayments a year. That may sound like the same thing, but in fact you’ve added the equivalent of one extra monthly repayment every year on a principal and interest of your loan. That can add up to big numbers over the life of your loan.
Not all mortgage providers will let you make fortnightly repayments, so check first (ideally before you take out your loan).
Utilise lump sums & windfalls
If you get a large tax return, bonus, inheritance or investment dividends, consider adding these to your mortgage account. With many home loan products, these can help reduce the amount of interest you’re paying significantly, cutting years off your repayment schedule overall.
Remember there are tax implications for these, so check carefully about any additional costs you might be obligated to pay.
Consider updating your bank accounts
If your mortgage is your financial priority then it makes sense to make sure you are working it the best way possible to minimise interest. Talk to your bank manager to make sure you’re using your accounts the right way, sometimes a few tweaks can make a difference.
Review & compare regularly
Your needs change, your income changes, as do home loan products and interest rates. Don’t leave your home loan paperwork to gather dust and slip into a routine of automatic debits that you forget about. Stay on top of what you’re paying and how you’re tracking.
Work with your mortgage provider to develop a system for regular health checks on your loan, asking if there are better interest rates, better deals, different products that better suit where you’re now versus when you took out the loan.
Good deals are out there, but you usually have to do some homework to find them. Don’t forget that there can be penalties for switching home loans – you’ll need to weigh that against any savings.
The most obvious way to pay your place off faster is to cut back on other costs and invest that money into your loan fortnightly or monthly. If you can afford to take regular holidays (though you no doubt deserve them), think of how that money could be better spent invested in your loan.
When you’re mortgage free, the holidays should be all the more enjoyable!
Get it right before you start
If you haven’t bought yet, the single best way to pay off your property (if that’s your goal) is to be able to afford it. Take care not to overcapitalise when you buy, as miscalculations or stubbornness about what you can afford is a sure fire way to end up in a vicious repayment circle.
Start right – have a no obligation chat with our Finance Consultant Steve Conrad and plan your loan like you plan your home. You can contact Steve via email: firstname.lastname@example.org or by phone: 04 6272 8177 or 0428 487 882.