How Can I pay my Home Loan faster?
Chances are, you took out your home loan over the standard 30 year loan term. But let’s be honest, do you really want to be paying your off your mortgage for this long? Here are 10 tips to help you pay off your loan much quicker, saving thousands in interest along the way.
1. Make more frequent repayments
Instead of making repayments each month, why not pay half of your required monthly payment every fortnight? As there are 26 fortnights in a year, you’ll end up paying an extra month’s repayment without even noticing!
For example, if your monthly repayments are $2,000 by paying monthly you’ll pay $24,000 off your home loan. But if you pay $1,000 each fortnight you’ll have repaid $26,000. You’ve already trimmed almost 4 years off your loan by doing this.
2. Make extra repayments
Even small extra repayments can have a big impact over time. That’s because additional payments come straight off your loan balance. This lowers the interest component of next month’s repayment, so more of that payment reduces your loan balance.
If you pay $100 extra per week on a $400,000 loan you will knock 8 years off the 30-year loan term!
3. Tap into redraw
A redraw facility lets you withdraw cash from your home loan if it’s needed in an emergency. This makes it reassuring that you can add any spare funds to your loan to help pay it off sooner, and still have access to the cash if it’s needed.
4. Consider an offset account
A home loan offset is an account linked to your mortgage. The balance of this linked account is deducted from (or offset against) your home loan when loan interest is calculated. It’s a smart way to use your spare cash to get ahead with your mortgage.
If you have a $400,000 loan, and $50,000 in your Offset account, you only pay interest on $350,000. Winning!
5. Add lumps sums
Almost all of us receive lump sums of cash at some stage – usually a work bonus or annual tax refund. Put this money to work by depositing it into your home loan. It will come straight off the principal, letting you see the good progress you’re making.
6. Know your budget & keep on top of your cash
Know your spending habits and be disciplined. A missed bill, late repayment or an overdrawn account can leave a mark on your credit file – yet this is one of the best assets you have to secure competitively priced finance.
Stay on top of your finances, you’ll be able to secure better priced finance down the track.
7. Consider a Package
Do any of us like paying fees? We all want savings, and a package loan can offer just that. By bundling a number of products with the same lender – typically your home loan, a credit card and a transaction account, you will more than likely avoid a variety of fees. Chances are you’ll also receive a life of loan discount on your interest rate.
8. Think about splitting your loan
If you’re keen to take advantage of all time low interest rates but you’re not comfortable fixing the full balance of your loan, a split loan can provide the best of both worlds. It means being able to lock part of your loan into a low rate for 2 or 3 years and having the rest on a variable rate, meaning you can still make as many extra repayments as you like.
9. Don’t be so extravagant
Do you really need to eat out every weekend? I’m not saying you need to live on the bread line, however any gratuitous spending could be better served going towards your mortgage. Think about what you really need & identify those non-essential purchases.
10. Speak to your Bank & Broker
What’s the easiest way to get a discount? Ask for it. Call your bank and ask them the question. If they say “no”, then shop around for a better deal.
WFS has relationships with almost 40 Lenders – the chances are your needs have changed since you first took out your loan. Why not secure a better deal?