How to pay off your home loan sooner

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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.