Reducing the life of your loan isn’t difficult; there are many simple things you can do to cut years off your mortgage. Here are some tips that will help you be mortgage-free sooner than planned.
Small extra repayments
One of the most obvious ways to pay off your home loan quicker is to make extra repayments. Depositing lump sums, such as a tax return or work bonus, will always be beneficial, however it doesn’t always take large amounts to make a substantial difference.
Let’s say we pay an extra $50 a fortnight on a $500,000 loan, that saves you $32,000 of interest over the life of the loan which in turn will save you just over two years, That’s only $25 a week.
Switch your payment intervals
If you find that you don’t have the discipline to make extra repayments, then simply switching your payment structure can also help save years off your mortgage, as well as simplifying your finances if you are paid fortnightly.
Because there are 12 months in a year but 13 four-week cycles, by switching your payment intervals from monthly to fortnightly, you are essentially paying off an extra month per year.
Make sure you have the right type of loan
Ensuring your loan allows extra repayments without penalty will let you to make the most of bonuses or small extra payments to reduce the loan principle more quickly, saving on interest immediately.
An offset account will use your savings or living expenses to reduce your principle, while still allowing you to access these funds from a transaction account.
Although you may have to pay extra fees for the offset or redraw account, these may well be lower amounts than the interest saved. Talking to Summit Property Finance is the easiest way to work out whether this option is financially sound.
Have you checked your interest rate recently? If you are paying 1% more than you could be on a $500,000 mortgage you could be costing yourself $5,000 per year in wasted interest.
Paying off your home loan faster isn’t difficult, however it does require financial discipline and expertise in ensuring the right loan features are in place.
Have an obligation free chat with us to see what is best for you.
