5 Tips to Pay your Home Loan Faster
Home loan feeling like it is taking forever to pay off? Imagine what you could do when the loan is paid: go on holiday, home renovations, put it into savings or even pay existing debts. These 5 tips will will help you to pay off your mortgage more quickly.
1. Make your repayments on a weekly basis
The interest on your loan is calculated from the outstanding balance each day. By making more frequent payments, the overall interest you will pay on your loan will be reduced. The balance being reduced through more regular payments results in the interest being calculated on a lower balance. Over the space of a 30 year loan, these small savings can really add up to a substantial amount of money which can be put towards the mortgage and ideally pay it off faster.
2. Align mortgage repayments with your income
The idea is simple: if you are paid weekly or fortnightly, align your home loan repayments to match that frequency. Having the ability to make repayments on your mortgage as soon as possible minimizes the interest you pay. Week by week the effects of this are small, although over the term of the loan, these minor savings can add up to help pay your home loan quicker.
3. Use Lump Sums
Consider using lump sum payments you have received, such as: work bonus, tax refunds or investment dividends, by putting them towards your mortgage. Although a new toy may be tempting, sacrificing these luxuries is a great way to shave years off your home loan.
4. Offset your mortgage with a savings account
The use of an offset account is a useful way of saving on your home loan. This allows you to reduce the interest charged on your home loan by paying part of the loan amount with your savings.
Say you have a $300,000 loan balance and you place $10,000 into an offset account; you will only have to pay interest on the balance of $290,000 as apposed to $300,000. Resulting in you being able to put this reduced interest towards paying your loan faster.
5. Get the best rate and evaluate the health of your mortgage
Stop being a slave to your mortgage repayments! The easiest way to ensure you’re saving money on your home loan is to review your current home loan every year. It’s as simple as checking your most recent statement or logging into your online banking. If you are on a variable rate product, your interest rate may fluctuate with the moments from the Reserve Bank and lenders changing their products.
Why not get a free review today? Let the experts at SwitchMyLoan give you a free home loan review to ensure you’re on the most competitive rate. Visit SwitchMyLoan.com.au or call 1300 307 155.
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