Many Australians dream of owning their own home and this dream usually comes with a large mortgage. Often it may feel like an uphill battle and slowly chipping away at what you owe over what feels like a very long time (30+ years).
What if you could pay off the home loan quicker?
If you pay off you mortgage quicker the less money you will pay.
Generally if you can afford to increase the amount you are re-paying (even just a little) and change the frequency of the payment you could potentially save hundreds of thousands of dollars in interest.
Here are some starting points to help with bringing down that debt:
Increase payment frequency:
If you change the payment frequency to fortnightly instead of monthly. You will have 26 repayments instead of 12 repayments a year. This will equate to adding the equivalent of one extra monthly repayment every year on a principal and interest of your loan.
You will need to check with you provider to ensure that they accept fortnightly repayments.
Lump sums and Windfalls:
If the opportunity arises and you receive a large tax return, investment dividend, bonus or inheritance contemplate putting these on you mortgage. This may help reduce the amount of interest you’re paying substantially and could cut years off the repayment schedule. Bear in mind these may have tax implications, so check carefully.
Explore discount entitlements:
Some lenders offer discounts if you are a member of a certain occupation or professional organisation. This may lead to different banking options and potentially additional savings. If you don’t ask, you don’t receive.
Review & compare regularly:
Home loan and banking products change regularly as well as our own personal needs. Ensure you routinely review and compare what you have against what is in the market. Don’t leave the paperwork to gather dust.
Ensure to stay on top of what you’re paying and how you’re tracking.
Try to develop a system with your mortgage provider for regular health checks on your loan, asking if there are better interest rates, better deals, different products that better suit where you’re now versus when you took out the loan.
Keep in mind that there can be costs for changing home loans – you’ll need to weigh that against any savings.
Get frugal:
The most obvious way to pay your place off faster is to cut back on other costs and invest that money into your loan. If you can afford to take regular holidays, think of how that money could be better spent invested in your loan.
The basic points above provide a solid starting point in helping to reduce home loans debt quicker. It is always recommended that you speak with professionals (be it a financial advisor, mortgage broker, tax agent) to get the right advice for your situation.