Paying off a home loan early can lift a significant financial load off your shoulders and may save you money in the long run.
Here are proven ways you can free yourself from financial debt faster.
Why pay off your mortgage faster?
You can enjoy the freedom of being debt-free faster by boosting repayments early, among other ways. Additionally, borrowers need to pay off early to move on to another mortgage or investment sooner.
Paying off your mortgage early means reducing the time for repayments, practically reducing the amount of interest you will pay in the future.
Apart from the interest reduction, paying off your mortgage early opens new opportunities for you to invest in more property, leverage equity home loans and more.
To achieve that, here are a few ways to help you:
1. Organise your budget
Organising your budget starts with knowing how much money is coming in and when. Keeping a (manual or digital) tabulation, including how much money you are making and its source and frequency, is a good way of tracking things.
Once that is done, the next step is knowing how much you’re paying in expenses on a regular basis. These expenses are often divided into fixed and debt.
- Fixed expenses are your essential costs, including electricity, water, communication bills, food, and medical costs.
- Debt expenses, on the other hand, are your debt payments, including your mortgage repayments.
These expenses can be estimated by tracking how much you spend on these costs on average.
Additionally, it is also recommended to include an extra buffer for any unexpected expenses that may arise.
Budgeting isn’t limited to tracking cash inflow and outflow; rather it involves striking the perfect balance between spending and saving and adjusting it to fit your lifestyle.
2. Avoid interest-only repayments
Mortgage arrangements can be tricky and complicated without a mortgage broker to keep you informed.
For instance, you may be enticed to opt for an interest-only loan since it can offer you convenient, low repayments during the interest-only period. However, once this period ends, it may be difficult for you to adjust to the principal and interest repayments since they are higher.
Furthermore, paying off the loan principal and reducing the interest is the way to complete the mortgage faster. Interest-only loans mean you are only paying interest during the interest-only period, so the principal remains untouched and you end up paying more over the life of the loan.
3. Consider paying extra per month
This is probably the first thing that comes to mind when trying to pay off the mortgage faster – and for good reason.
Talk to our mortgage brokers to know if extra payments warrant certain fees or if your current home loan allows extra repayments.
4. Change your monthly repayments to fortnightly
If your budget allows it, another method you can use is to switch from the common monthly repayments to fortnightly ones. This is a small difference, but halving the monthly amount every two weeks means you’ll end up paying 13 monthly repayments per year instead of 12, since there are 26 fortnights in a year.
5. Open a mortgage offset account
An offset account on top of your home loan allows you to use your savings to reduce the amount of interest you pay.
The balance you have in this account can be used to offset your home loan amount, so your lender will only charge you interest on the difference.
For example, if you have a $700,000 mortgage and $100,000 in savings held in an offset account, the bank will only charge you interest on $600,000.
Talk to our mortgage brokers at 1300 030 388 or enquire now to discover 100% offset home loan accounts that work for your needs.
6. Find a lower interest rate
With enough time, knowledge, and help from mortgage experts, going through home loan offers from several lenders can help you find which ones are offering low interest rates.
At Mortgage Pros, we can help you refinance to a lower interest rate so you can save more money from interest in the long run.
Talk to our senior mortgage brokers at 1300 030 388 or enquire now, and we’ll take you through our panel of 40+ banks and non-bank lenders to find the best home loan and refinancing solutions.
7. Get the right home loan solution
Hopping from one bank to another will definitely take time and may harm your credit score from successive loan enquiries.
That said, you can save yourself from the legwork and time by sitting down with us and discussing your financial goals at Mortgage Pros. We’ll guide you throughout your loan application and make sure you understand the terms and conditions to make an informed decision.
We comb through the fine print and leave no stone unturned, so you know that you’re applying for the right home loan to realise your financial goals.
How a Mortgage Broker can Help
With decades of experience in senior banking positions, we know what lenders are looking for in your loan application.
We put your unique circumstances front and centre so you get the right home loan that works for you. Our dedicated mortgage brokers will take care of your due diligence, review credit policies, and negotiate the interest rate on your behalf.
Deciding to pay off your home loan early can be crucial, especially if you’re unaware of the hefty fees involved. We’ll walk you through your current loan situation and assess whether paying off early can save you more or if it’s smarter to refinance for a lower interest rate instead.
Talk to our senior mortgage brokers about your financial situation at 1300 030 388 or enquire now.
