Do you want to pay off your home loan sooner? I mean – who doesn’t… Well here they are, our top tips to help you pay off your home loan sooner.

Get a lower interest rate

Now, this might seem like a no-brainer, but a large portion of the population doesn’t actually shop around when it comes to their home loan, they just take what they can get. We shop around for the best deal on everything, our car, our couch, our freezer, so why not our home loan? So did you know that there is a safe and effective way to shop around for a better deal on your home loan without negatively impacting your credit score and ruining your chances at a low-rate home loan – simply talk to a broker.

Did you know that our expert Mortgage Brokers compare products from most of Australia’s most trusted bank and non-bank lenders and can compare hundreds of their mortgage products on your behalf to get you a better deal?

Make more frequent home loan repayments

Interest is compounded daily, so the faster you make a repayment, the less interest overall you’ll pay. If you get paid weekly, you can make repayments weekly, instead of waiting till the end of the month or whenever your repayment is due. Now it might not seem like much at first, but it will add up over the life of your home loan.

Consider making extra repayments

If your budget allows, make additional repayments! Even a little can go a long way. On a $500,000 home loan over 30 years, simply making an additional weekly repayment of just $50 can save you over $20,000 just in interest over the life of your loan and shave 3 years and 15 weeks off your home loan duration.

Check out our suite of handy home loan calculators including our Extra Repayment Calculator to see how much you can save simply by making additional repayments each week.

Put your savings into an offset account

An offset account is basically a savings account linked directly to your home loan account. It acts as a sub-account, but you are able to redraw the money in this account when you need it. The beauty of an offset account is that any money sitting in the account offsets the interest you are required to pay on your home loan. In most cases, you can even get a 100% offset account linked to your home loan, which means 100% off the funds work towards offsetting your home loan interest.

For example, if you have a $500,000 home loan balance and $50,000 sitting in your offset account. You will only incur interest on $450,000. Best of all, you still have full access to this money while it’s sitting there working for you to offset your interest.

Be smart when you refinance

It is worth considering refinancing your home loan every couple of years. While you may not choose to refinance, it is worth keeping note of what interest rates and loan features are available to help you save money on your home loan to ensure you are on track to pay off your home loan as soon as possible.

However, some points worth noting before you choose a home loan refinance package:

  • Make sure you aren’t paying for gimmicky loan features that you won’t use, that are simply costing you money
  • Make sure you read the contract and there aren’t any hidden surprise fees or charges that you are likely to incur
  • Be careful when you refinance not to ‘restart’ your loan term. The repayments may look good, but there’s no point if you’re simply extending your loan term out further and end up paying more interest in the long run
  • You don’t have to take the home loan that your bank wants you to have – remember you always have options. Speak to one of our friendly Mortgage Consultants to discuss all your options

Don’t go interest-only

Interest-only loans may look inviting due to some potential tax benefits; however, it is also important to weigh up how much interest you will end up paying on the home loan. Interest-only loans may work for investors; however, it won’t help you reduce your mortgage any sooner since you’re not actually paying off any of the principal loan. Be sure to speak to a Financial Advisor about your specific circumstances prior to making any financial decisions.

Decrease your loan repayment term

If you can make additional repayments comfortably within your budget, it may be worth considering decreasing your home loan term for example from 30 to 25 years. This will increase your minimum weekly or monthly repayments; however, it will also mean your home loan is paid off much sooner and you reduce the total amount of interest payable significantly.

For example, on a $500,000 home loan over 30 years, your monthly repayments could be roughly $1999 and you would pay a total of $219,600 interest, whereas if your loan term was 25 years, your repayments would be roughly $265 more per month, however, you would save nearly $40,000 just in interest simply by reducing the length of your home loan down to 25 years.

Have Another Question?

If you have any questions about home loans or refinancing, feel free to contact one of our friendly Mortgage Consultants on 1800 538 287 or visit the Home Loans section on our website for more useful information and handy calculators.