8 Effective Strategies to Pay off Your Home Loan Faster

8 Effective Strategies to Pay off Your Home Loan Faster

If you can pay off your home loan balance early, you’ll get a lot of benefits. One of your largest debts will be eliminated, and you’ll save money on interest over time, too.

As leading mortgage brokers, in this article, we have compiled a list of 8 strategies to help you eliminate your mortgage sooner. No matter if you’re a landlord or a homeowner, you can always find ways to reduce your loan principal more quickly.

  1. Reduce Your Interest Rate

The greater the interest rate, the greater the cumulative cost of your monthly payments. If your monthly interest payment is reduced, you may have the financial flexibility to increase your principal payment. That’s why we recommend the cheapest home loan rates possible.

Refinancing to a lower interest rate may seem time-consuming and difficult at first, but it can save you thousands of dollars. To get a better rate on your home loans in Australia, you might not even have to refinance. 

It may be sufficient to simply request that your lender match the rate being offered to new customers to save money. If you have a history of being a reliable borrower, they may grant your request. The best home loan lenders, who now must compete for borrowers, know full well the value of customer retention strategies.

You can make additional payments on your mortgage if you’d rather not raise your monthly payment amount. You can save money on interest payments by paying off your loan early.

  1. Make Your Home Loan Payments More Frequently

Did you know that if you pay your mortgage every two weeks instead of every month, you will pay off your loan faster? It’s possible you don’t see the big deal here, but that’s the point. There will be no discernible impact on your lifestyle as you pay off your loan a little bit quicker each month.

  1. Think of Making Additional Payments

Although it may seem like stating the obvious, making extra payments on your home loan is a great way to get it paid off faster. There is no requirement for regularity in making additional payments even when you have taken the best online home loans in Australia.

If you get a bonus at work, get a tax refund, or come into some extra money, you might want to put it toward your mortgage rather than spending it. Since you’ll have the loan paid off sooner, you’ll save money on interest payments as well.

Keep in mind that prepayment penalties may apply if your loan’s interest rate is fixed. When borrowers with a fixed-rate mortgage make prepayments or principal payments before the end of the loan term, the lender may impose a break fee.

  1. Utilize Your Redraw Facility

You can use a redraw facility if you want to make extra loan payments but would rather not have the money disappear forever. Any overpayments made on a mortgage can be put into a “redraw” account and withdrawn as needed.

Redrawing accounts can help fund home improvements and other large expenses despite the small fee most lenders charge for using them.

  1. Place Your Savings in an Offset Account

An offset account can be thought of as a savings account tied to your mortgage. It can be used for buying things and getting money out, so it’s great for paying regular bills.

Your loan interest will be lower if you have money in your offset account.

The interest you pay on a home loan of $300,000 would be reduced to $250,000 if you had $50,000 in an offset account.

If you can reduce your interest rate, you may have more money each month to put toward the principal. As a result, you’ll be able to reduce your loan balance more quickly.

  1. Refinancing Requires Some Forethought

It’s wise to consider refinancing every few years. It’s important to make sure your home loan still meets your needs and that the interest rate is competitive even if you don’t plan to refinance anytime soon.

When considering refinancing, be sure to verify that you aren’t forking over money for any extras that are going unused. 

It’s great to have an offset account, but there’s no point in paying the annual fee if you never use the account. There are plenty of zero- and low-interest loan providers out there, so make sure you’re not overpaying.

When refinancing, make sure you don’t accidentally “restart” the term of your loan.

For saving money on interest and getting your house paid off faster, a shorter loan term is preferable.

  1. Avoid Taking Out an Interest-only Loan

The tax advantages of interest-only loans are attractive to some property owners and investors, but they won’t speed up your mortgage payoff.

Principal payments (those applied directly to the original loan amount, as opposed to interest) are the key to paying off a mortgage loan faster.

  1. Make Your Loan Payments Shorter

Since you first applied for your loan, a lot has likely happened in your life.

It’s possible that shortening the duration of your loan payments could be an option if your financial situation has improved. From thirty to twenty-five, to give just one example.

An increase in the bare minimum of your regular repayments is required. You could save tens of thousands of dollars in interest and retire your loan years earlier if you can afford the increased payment.

Conclusion Refinancing could be a good option if you want to shorten the time it takes to pay off your mortgage and become the sole owner of your home. As we are the leading home loan experts, get in touch with us today to discuss your home loan options.

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