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Home Loan Tips

Tips To Pay Off Your Home Loan Faster

Economists say that Australians are paying off their mortgages at a pace unseen since the peak of the Global Financial Crisis.

The Reserve Bank of Australia (RBA) released figures that show many households are repaying loans faster, with 50% of owner-occupiers ahead on their repayments. This coupled with the “less exuberant approach to borrowing” being displayed by many households has greatly increased the strain on retailers and banks.

RBA research suggests that many homeowners are using their income from one-time payments, including salary bonuses or profits made from selling shares, to make extra repayments on their home loan.

For those looking to pay off their home loans faster, here are a few simple steps which can help you save money and time in paying off your mortgage.

  • Tip #1 – Choose a Loan with an Offset Facility

    An offset facility is basically a savings account linked to your mortgage. By giving you the ability of having your salary paid directly into the offset account, this loan feature can greatly reduce the interest payable on your home loan. This happens because the balance of this savings account is offset against your mortgage allowing you to pay off your loan sooner and build up equity in your home.

  • Tip #2 – Regularly Assess the Health of Your Loan

    It is difficult to pay off your loan quickly and efficiently if your mortgage options are not suitable to your current financial situation. If you feel that your home loan is not right for you, it may be time to consider refinancing. Refinancing your mortgage is a great chance to get some additional features on your home loan, reduce fee payments and take up a loan with a lower interest rate. It is important to contact a mortgage broker to be sure that you are making the right decision; one that will save you money and help you pay off your loan faster.

  • Tip #3 – Make Repayments More Often

    While many households prefer to make mortgage repayments on a monthly basis, choosing to make repayments fortnightly or even weekly will not only help you pay off your loan faster, but it will also cut down the interest payable on your loan, saving you money.

    The easiest way to make fortnightly repayments is by aligning your mortgage repayments with your income cycle.

    By making mortgage repayments fortnightly, you effectively make an extra month of repayments each year. It is important to read the fine print and doing your research when looking for a home loan as this method will not work with all home loan products.

  • Tip #4 – Make Lump Sum Repayments

    While using the money from your tax return or salary bonus to make a lump sum repayment on your mortgage may seem like a huge sacrifice now, in truth it is a great way to pay off your loan faster. Sure this may mean going a year or two without that holiday or new ‘toy’, but if you choose to make lump sum repayments on your mortgage at least twice a year, you will effectively be shaving years of interest payments off your home loan.