Everyone wants to pay off their loan sooner and here are a few ways to help do that:
Make Fortnightly Repayments
When making fortnightly repayments, you pay half of the monthly repayment amount. As there are 26 fortnights per year, this means that you are making 13 months of repayments, an extra month’s repayment off the loan. This can help to reduce your loan balance quicker as every extra month adds up!
Pay extra off your Home Loan
In the first few years of your home loan, a large amount of interest is paid and not as much principal paid off. You might see your total loan amount slowly decrease, but not by as much as you hoped for. Making extra repayments off your loan, such as your tax return or any extra money in your accounts, can help to reduce the loan term quickly. When you make extra home loan repayments, it comes straight off your principal amount and results in less interest being paid. Use our home loan calculator to get an idea of how much you can save.
Using an Offset Account
An offset account is where you can keep your savings but the balance in this account is offset against the loan balance and reduces the interest payable each month. For example, if you have a loan of $400,000 and an offset account with $50,000 in it, you only pay interest on $350,000 and as this interest is calculated daily this has an immediate effect. This can allow you access to your savings but also have positive benefits on your mortgage, however, there is an annual fee associated with this by the majority of lenders. It is important to weigh up the annual fee costs and the amount of interest savings you could make, as a small amount of savings may not provide the greatest benefit, but we are here to do the calculations for you, just get in contact!
Try to make Higher Repayments
When the interest rate is rising, it may be hard to find some extra money to make repayments above the minimum amount. However, when the interest rate is decreasing it is recommended that you try to keep the repayments the same or if you wish to lower them, that they are still above the minimum amount. This will help you to pay more of the principal amount off each repayment and will help you on the way to paying off your home loan sooner!
Find the best rate for you!
There are many loan products out there with different rates and features, so choosing a loan that best suits you and will help you to pay it off quickly is important! Sometimes your interest rate might keep rising as the banks have a thing called ‘Loyalty Tax’ where the best rate is available to new clients, whilst existing clients don’t get access to it. Shopping around and looking at other rates is another way to help pay off your loan sooner, as the lower the interest rate, the less interest you have to pay. If you want to consider other options, contact us to start the process!