How to pay off your home loan sooner

fixed-rate cliff

Our insights

While some of the strategies for paying off your home loan sooner may seem obvious, taking the time to consider each one and take action where possible can shave years off your loan term.

Pay fortnightly instead of monthly

When you take out a home loan, lenders will often provide the option of making repayments monthly or fortnightly. By choosing to make your repayments fortnightly, you’ll pay off your loan faster. That’s because there are 12 months in a year, but there are 26 fortnights, so by making repayments fortnightly you can effectively squeeze another month of repayments into the year. That can equate to almost three years off your home loan over a 30 year loan term. 

Secure a loan that includes an offset account

Want to use your savings to lower the interest on your home loan but also have access to the funds when you need them? An offset account allows you to do both. For the purposes of calculating the interest owed on your loan, the amount of money in an offset account is taken off the total amount of your loan, meaning you accrue less interest and can pay off your home loan faster. 

Don’t reduce your repayments, even if rates fall

It’s very tempting to see interest rate drops as a pay day that will give you more cash in your pocket at the end of the working week. This is, however, a great opportunity to pay off your loan faster. By making the higher level of repayments for months or years you would have become used to budgeting accordingly to ensure you have enough money to cover all of your obligations. It should be, therefore, easy to continue to make repayments at the same rate, even if the variable interest rate has come down. Conversely, if you decide to take advantage of the interest rate fall and have an extra $50 in your pocket each week, your spending will likely adjust accordingly and you’ll notice no difference in your quality of life. 

Consider small lenders too

It’s normal when thinking about securing finance to instinctively look to the big four banks. Small lenders, however, can sometimes fight harder to secure customers, which can mean lower rates for you. An experienced mortgage broker will know the best products available on the market and will also have personal relationships with lenders, which they can leverage to get you the best deal possible.

Leverage your other financing needs

If you have a home loan and are considering taking out a separate business loan, consider using the business loan to get you a better all-round deal. An experienced broker may be able to take all of your financing business to lenders to see what they can offer. Banks may offer better rates on your home loan and business loan in order to secure all of your business. 

Secure a variable or split loan 

Depending on your circumstances, you may be able to make additional lump sum payments towards your home loan at certain times. While there are limits to how much extra you can pay towards a fixed loan, there aren’t those limits on variable loans. Consider a viable or split loan so you have the option to repay your loan faster.

Assess the market regularly

Many people stop thinking about their home loan once they are in their new home. But rates change frequently, and the best deal in the market can soon become one of the worst. Ask your broker annually to assess the market and provide you with options for refinancing. 

Talk to an expert

Calder Financing Broking can find you the best deal for your needs, and guide you through the process.

Contact the team or call directly on 08 8373 3333 to meet an experienced broker today for a free, no obligations discussion about your needs.

Written and Supplied by Hayley Walsh of Calder Finance Broking, for more information please visit the Calder Finance website. Please note that Calder Finance Broking Pty Ltd is a Corporate Credit Representative of BLSSA Pty Ltd ABN 69 117 651 760 ACL 391237.


How to deal with interest rate rises


Our Insights

Rising interest rates have homeowners around the country feeling decidedly jumpy. 

The Reserve Bank of Australia’s significant hike of 50 basis points in June 2022 took the cash rate to 0.85% and was the first back-to-back increase in 12 years.

It followed a 25 basis points rise in May, lifting rates out of the basement where they have sat at a breathtakingly low 0.1%.

The June increase will cost homeowners with a $500,000 mortgage around an extra $130 a month or $1600 per annum.

So what does the future hold for borrowers, with further jumps on the cards against the backdrop of high inflation? 

If you seek advice and plan ahead, there are ways to soften the blow and even delay the impact of increasing interest rates.

And just like shopping around for the best deal on the latest 65-inch TV, you’d be crazy not to!


Firstly, take a deep breath, don’t panic and look at this with some perspective. 

Home loan rates have been very low for more than a decade, giving many people the opportunity to buy into the market and own their own patch.

It’s not that long ago that interest rates were around double what they are now with a spike of 9.6% in September 2008.

That was in the middle of the Global Financial Crisis.

Skip back a couple more decades and your parents might remember paying 17% in 1989.

On the flip side, most mortgages are much higher now than they were then, even when taking into account interest payments as a proportion of household income. 

So what can you do to minimise the pain? 


The numbers game

By making fortnightly payments instead of monthly, you’ll get that loan down much more quickly.

That’s because there are 26 fortnightly payments in a year. You’ll effectively be squeezing an extra month’s worth of repayments into every year without even realising it.

With an $800,000 loan over 30 years at an interest rate of 5%, you’ll save around $210,000 in interest payments and own your house five years sooner!


An offset account

This really is the golden ticket. 

If you plough every dollar you earn into an account that offsets your loan, you can shed years off of your loan.

That’s because if the home loan interest rate is 5%, you are effectively earning that on your money, instead of say the 1% being offered in a savings account.

And unlike bank interest, it is tax free!


Make extra repayments

Pour extra money into your mortgage whenever possible.

A surprise tax refund or a nice end of year work bonus will really cut into the mortgage if you can take it straight off your principal. 

Interest payments are a necessity but if you can reduce your principal, you are well on the way to owning your home in record time.


Renegotiate and shop around

Stay vigilant and ensure you have got the best deal possible. 

Work with an experienced mortgage broker who can advise you on the best way forward, which could include going to market to find the best deal across Australia’s many lenders, or even negotiating with your current lender for a better deal. 

Do your homework and know what one-off, ongoing and exit fees are applicable, both with your old loan and your potential new one.


Variable or fixed?

The reality is, if you don’t have a fixed rate by now, you have missed the boat.

While fixed rates offer a level of certainty and security, the time to secure one is not when rates are already rising.

You’ll usually pay well over 100 basis points above the variable rate. They often come with hefty exit fees and don’t allow extra repayments.


Get advice today

It is more important than ever to get professional advice before making financial moves.

Calder Wealth Management are financial experts who can help you make the best financial decisions for your long term interests.

And to get the right finance strategy and deal, working with an experienced mortgage broker is essential. Talk to our team at Calder Finance Broking about your property goals.

Contact us today to discuss all of your financial needs and concerns.

Written by Hayley Walsh from Calder Finance Broking, for more information please visit the Calder Finance website. Please note that Calder Finance Broking Pty Ltd is a Corporate Credit Representative of BLSSA Pty Ltd ABN 69 117 651 760 ACL 391237.