There are a few key things you can do to reduce the number of years it takes to pay off your home loan; potentially saving you hundreds of thousands of dollars.
Firstly, understand your home loan product and never be afraid to ask questions. You should know the interest rate, the fees associated with the loan and how many extra repayments you can make.
Make extra repayments as often as you can afford them. It's amazing how much this can save you over the term of a mortgage.
Put any lump sum amounts you receive like bonuses, tax rebates or an inheritance towards your mortgage. These large lump sums can cut years’ worth of interest off the loan term saving you big bucks.
Make repayments fortnightly, it can reduce your home loan period by up to 5 years than if you pay monthly.
Use an offset account
An offset account is a day-to-day deposit account typically linked to a variable rate home loan. It allows the amount you have in your offset deposit account to reduce the balance of your home loan for the purpose of calculating interest charges.
Let’s say you keep $2,500 in your offset account. If you have a $350,000 home loan with an interest rate of 5.20% per annum, you’ll only pay interest on $347,500 thanks to the offset. This means you’ll end up paying off your 30-year home loan three months early and saving about $76,881 without any impact on your lifestyle.
Review your mortgage every couple of years or have a mortgage broker do it for you. The review should compare your mortgage to what else is on the market to ensure you're getting the best deal. Shop around and ask lots of questions.
The best way to pay off your home loan as quickly as possible is to be actively involved in managing your mortgage or to have a mortgage broker do it for you. We provide a service that is free to you and we do it to save you money!
Please feel free to call us on 0487344352 if you have any questions and would like to get debt free quicker!