How to pay off your home loan faster and save big bucks
Published by MFAA
Making extra repayments on your home loan can be a clever financial strategy. Investing your extra cash into your home can speed up your loan’s life cycle, with the added benefit of saving money in the long run.
are some tips that can help you be mortgage-free sooner than planned.
Small extra repayments
One of the most obvious ways to pay off your home loan quicker is to make extra repayments. Depositing lump sums, such as a tax return or work bonus, will always be beneficial, however it doesn’t always take large amounts or windfalls to make a substantial difference – planning for regular, small cash injections can have a great impact over the life of a loan.
Switch your payment intervals
If you find that you don’t have the discipline to make extra repayments, then simply switching your payment structure can also help save years off your mortgage, as well as simplifying your finances if you are paid fortnightly.
Because there are 12 months in a year but 13 four-week cycles, by switching your payment intervals from monthly to fortnightly, you are essentially paying off an extra month per year.
Make sure you have the right type of loan
Ensuring your loan allows extra repayments without penalty will allow you to make the most of bonuses or funnel small extra payments to reduce the loan principle more quickly, saving on interest immediately.
An offset account will use your savings or living expenses to reduce your principle, while still allowing you to access these funds from a transaction account.
Although you may have to pay extra fees for an offset account, or redraw facility, these may well be lower that the interest you can save. Talking to a finance broker is the easiest way to work out whether this option is financially sound.
your home loan faster isn’t difficult, however it does require financial
discipline and expertise in ensuring the right loan features are in place. Find
an MFAA Accredited Broker who can match you to your perfect loan..