How can I pay off my home loan sooner?
1. Look at options that can help you pay less interest
Transactional offset accounts are a flexible option for potentially reducing the interest you pay on your loan. Every cent you deposit into your transactional offset account goes towards reducing the debt on your home, while still giving you access to your money the same way your transaction account does.
A transactional offset account that allows you to link multiple accounts to the same loan is an option that can give you greater flexibility in managing your transactions. For example, you can set up different accounts for things like paying bills or for your everyday expenses. Any money sitting across these accounts works to offset the total balance of your loan and your interest is calculated on the net balance. This means you may be able to reduce the amount of interest you pay.
Some home loans give you the flexibility of accessing extra repayments you have made on your loan through a feature called redraw.
Redraw can be a handy feature to make use of if you need to pay for unexpected expenses like repairs to your investment property or for renovations to your family home.
This means you can put extra money towards your loan to reduce your home loan balance, and therefore your interest payments, without losing access to that money if you need it down the track.
3. Pay your loan off fortnightly
Making more frequent repayments could help you chip away at your loan faster. There are 12 months in a calendar year, but 26 fortnights. If you make fortnightly repayments (paying half your monthly repayment each fortnight), over the course of a year you’ll make the equivalent of one extra month’s repayment, and your home loan will shrink quicker.
Not all banks automatically calculate their weekly and fortnightly repayments in this way, so make sure you speak to your lender about your repayment options.
Use our Home Loan Calculator to see what difference fortnightly repayments could make to your loan
4. Consolidate debt.
If you have accumulated some credit card debt or personal looking at consolidating that debt into a home loan could be worth considering. This will generally put the debt on a lower rate and have a structured reduction programme. If you maintain the payments you had before you consolidated you are liking to pay it off a lot faster which then frees up your cash to focus on paying down the home loan.
5. Become budget savvy
When it comes to keeping on top of your finances, nothing beats good budgeting. The basics are simple: know how much you are earning and spending; monitor your budget carefully; resist temptations that will rock your budget; and, if problems with repaying your home loan arise, such as job loss or an unexpected health concern, don’t hesitate in contacting your bank to talk through your options.
Contact us to look at how you can pay off your home loan sooner.