The sooner you pay off your home loan the sooner you can start living debt free and without the burden of making monthly payments. Plus the sooner you can pay off your loan, the less interest you’ll end up paying overall – meaning you could end up saving thousands!
So how can you pay off your home loan faster?
Don’t lower repayments when rates go down – When interest rates drop so will your minimum repayments, but if you can afford the higher rate then why not keep paying it? You won’t even notice that you are paying more because you should be used to it and then if rates go back up again you will already be used to paying the higher amount.
Increase your minimum repayments – In fact why not increase your repayments? As little as an extra $50 or $100 each week could end up saving you thousands in the long run by reducing your interest and cutting years off of your loan term. If you’re worried about needing the extra money then you can get a redraw facility on your account that will allow you to take out any funds you have paid over the minimum amount.
Pay your mortgage weekly instead of monthly – If possible make your mortgage payments weekly or fortnightly, as opposed to monthly. By doing this you will attract less interest and hence save money over the term of the loan.
Use an offset account – An offset account is an account that is connected to your mortgage and whatever value sits in it reduces your mortgage by that amount. Having an account like this can help you cut down your mortgage by hundreds of dollars a year by reducing the amount of interest you pay and often you will save a lot more money using this method then by placing your funds in a regular savings account.
Make extra payments – If you receive a lump sum payment from a work bonus or another type of windfall then you should pay this into your mortgage right away. Even if you can spare an extra $100 every now and again it will add up over the long run and help you get ahead.
Refinance from time to time – Now is a good time to step back and take a look at your mortgage and ask if it’s working as best as it could be for you. With interest rates so low there are plenty of great home loan deals around so it’s well worth comparing what different banks have to offer. You may even find that you’ve paid off enough of your home loan that you have enough equity to help service a new loan. Seek professional financial advice and find out what your options are.