Tips to pay your home loan off sooner
Your home loan is one of the biggest expenses you'll likely ever have. For many of us, it can live with us for many decades so paying it off can seem a long way off.
The good news though is that when it comes to paying it off sooner, a little can go a long way so you can start saving on interest, give yourself some financial peace of mind and look forward to your next big plans instead.
Make additional repayments
Making additional repayments beyond what’s required in your minimum monthly repayment is a great way to reduce the total interest paid and term of your loan.
Getting it right
It doesn't necessarily mean throwing hundreds or thousands of dollars of spare cash at your loan. It's brilliant if you can, but if you can't, it's important to remember to start small with good habits so you don't give up early on.
Start by contributing an amount you won't miss by rounding up repayments to the nearest $100. For example, if your fortnightly repayment is $1,165 per fortnight, round it up to $1,200. While only an extra $35, it'll help build up a small buffer over time. By starting small, you're starting off with good habits which you can build on when you can.
Set and forget
If you can handle a little more, request a higher regular repayment. The regular automated higher amount means you don't need to rely on yourself or your will power to transfer more - it's done for you and you'll get use to the higher repayment over time.
Take advantage of small opportunities
If you don't want to commit to something quite so regular, then if you have a little extra padding in your pay packet and could afford to throw a little extra in the way of your mortgage, do it. Even if it's only $50 here and there. Over time, the amount you'll be ahead on your loan will go from 50's to hundreds then thousands.
Make lump sum payments
Lump sum payments could include things like gifts, tax returns, commissions, bonuses, and cash from selling something or even some savings you've accumulated.
It's easy to find a reason to spend these opportunities, whether it's because of an upcoming expense or to simply treat yourself, but they can give you some serious headway on your home loan. Why not treat yourself - by getting ahead on your home loan and enjoying the peace of mind and sense of security that can bring?
Use a 100% offset account (if available)
Another very effective way is to use a 100% Offset account if it is available on your loan. Simply deposit your savings into the 100% Offset account and any money in the100% Offset account is deducted from your loan balance before interest is calculated. It therefore saves you interest on your loan, thus shortening the term of your loan.
Above all, staying on top of your mortgage is a must. After all, your plans to get ahead can easily become thwarted if you aren't able to stay on top of the minimum repayments. Getting ahead on your home loan can give you a small safety net in the event you were faced with an unplanned expense, a reduction in your income or other event.
If you're ever faced with financial difficulty or uncertainty, reach out to us early to talk through your options.
Last updated: 12 November 2020
The information contained in this article is only correct at the point of time of publication. It is general information and has been prepared without taking into account your personal circumstances, objectives or needs. Please consider if this information is right for you before making a decision to acquire any product.
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