Find out how making extra loan repayments could shorten the length of your loan. Set the amount you'd like to pay each week, fortnight or month and calculate how long it will take to pay off your loan.
Extra repayments calculator
How do I pay off my mortgage faster
Paying off a mortgage is one of the biggest financial goals that we all face as homeowners. Essentially, to pay off your home loan you have to reduce the principal owing on your property.
Whether you're nearing retirement age or just looking for ways to reduce your home loan debt as quickly as possible, here are eight great tips for paying off your mortgage faster!
Increase your Home Loan Repayments
Increasing monthly repayments on your home loan by the smallest amount can take years off the life of a mortgage. Where possible, choose a home loan that allows you to make weekly or fortnightly repayments rather than monthly - this will allow you to make a few extra mortgage payments every year without noticing. Combining these efforts can have a surprising effect on the principal of your mortgage over a short period of time.
To help you figure out the numbers for your particular home loan situation, try using the extra home loan payment calculator above to see the benefits.
Reduce your Mortgage Interest Rate
One of the biggest opportunities to pay off your mortgage faster is to find a cheaper interest rate from the start. The key is to find a home loan that offers a cheap interest rate with lower fees and most importantly, a flexible home loan - your Choice Home Loans consultant can help you with this. They will explain all about mortgage reduction strategies, how to achieve a low interest payment and how you can reduce or eliminate mortgage fees.
If increasing your monthly mortgage payments is not an option, you can still pay off your mortgage faster by refinancing your mortgage to negotiate a lower rate, but sometimes break fees may apply.
Home Loan with Flexible Repayment Options
Flexible mortgages should allow you the freedom to make your mortgage repayments when and how you choose. If you're limited to making only monthly repayments to your home loan with no option to alter this, you're being limited and will essentially end up paying more interest.
Make Extra Home Loan Repayments Early
Some home loans allow you to make extra mortgage repayments. Any extra mortgage repayments that you make from the very beginning, such as making your first repayment on your settlement date, all goes towards reducing the principal on your home loan and minimising interest payments.
Get your Income Paid directly onto your Home Loan
Some home loans allow you take to get your income paid directly onto your home loan. Getting your income deposited directly into your mortgage effectively reduces the principle you owe as soon as it appears in your bank account. This in turn reduces the interest on your home loan.
Set up an Offset Bank Account
Some home loans allow you to set up an offset account. An offset bank account helps reduce interest costs on a home loan by linking the loan to a separate savings account. The balance in this account 'offsets' the home loan principal. Interest is then calculated on the home loan principal minus the balance in the offset account. For example, if the principal on your home loan is $180,000 and there is $5,000 in your offset account, then interest is only calculated on $175,000.
Pay a Lump Sum on your Mortgage
Some home loans allow you to make lump sum repayments. Another way to decrease your mortgage principal and pay off your home loan faster is by making a large lump sum payment. If you have come into extra money (eg. tax return time) or have a considerable amount of savings, this may be a wise financial decision. It will also dramatically decrease the amount of interest you will pay over the life of your mortgage, saving you money. Try our lump sum payment caclulator to see the effect on your home loan.
Stay in touch with your Choice Home Loans Broker
Over the life of your home loan, there will be numerous changes both in the home loan market and to your personal financial situation. Make sure you keep in touch with your Choice Home Loans broker regularly to help you stay informed.
The satisfaction a homeowner feels when making that final mortgage payment is really unmatched by any other financial achievement. Following these simple steps to paying off your mortgage can help you make that dream a reality real quick!
Now you have an idea of how much interest you may have to pay, it's a perfect time to talk to a mortgage broker. Our Choice Home Loans brokers can help you navigate the home loan maze and get into the home of your dreams.
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