Four ways to pay off your home loan faster

Mortgage repayments are often the biggest monthly expense for homeowners, and with cost-of-living pressures rising many Queensland households are looking for ways to reduce debt faster.

Reviewing your home loan may assist with the rising cost of living pressures, by ensuring you are spending less on interest, fees and charges.

Head of Lending Product, Operations and Distribution Medina Cicak shared her top tips.

1. Look for a better deal

Shopping around for a lower interest rate can make a big difference to the amount you pay in interest over the life of your loan.

“With interest rates being at the highest levels since 2012, it’s more important that ever to be shopping around,” Ms Cicak said.

“A lower rate can slash years off the life of your loan and save you thousands in interest.

“Keeping your repayment amounts the same at the new lower interest rate may also mean you pay your loan off quicker without sacrificing spending money.

“Assess the product based on how long you think you’ll stay with that lender – if you shop around every two years, base your research on what will give you the best savings across 24 months.”

Ms Cicak said when refinancing remember to always do your research and read the fine print.

“Be careful with ‘introductory rates’ which are normally slightly better than other banks however have a time limit and once that’s over, you automatically move to a higher rate,” she said.

“Cashbacks can be appealing for borrowers, but check if there’s any establishment fees on top of your loan, as this will cost you extra over time as you’ll be paying interest on the fee.

“With so many products now available in the market, it's important to work with your bank or broker to ensure you select a loan that suits your individual circumstances. Key factors to consider include the product, costs, fees and undisclosed fees such as a product switching fee - these all add up

“Don’t forget to ask about the break fees for switching to another lender, as they can be significant and prevent you from shopping around in the future.”

2. Up your repayments

If you have the capacity, adding a bit extra to your repayment amounts could save you in the long run.

“Increasing your repayments above the minimum amount will help reduce the amount you owe,” Ms Cicak said.

“Adding an extra $25 a week could mean cutting years off your home loan.”

Use our home loan repayment calculator to find out how increasing your repayment amount could impact your loan.

3. Pay fortnightly

Switching from monthly to fortnightly repayments is a simple strategy for reducing your home loan.

“There are 26 fortnights in a year but only 12 months so split your monthly repayment amounts in two and pay fortnightly,” Ms Cicak said.

“You’ll essentially be making 13 monthly repayments a year.

“It makes a big difference to your loan balance but won’t make a big difference to your disposable income.”

4. Offset it

An offset account may help you pay less interest on your home loan.

“The balance of your account is offset against your home loan which reduces the portion of your home loan that is accruing interest,” Ms Cicak said.

“You’ll still be able to access the money whenever you need while it’s working to reduce your interest repayments.”

Learn more about RACQ Bank Home Loans

The information in this article has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in the document is general advice and does not take into account any person's particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs.

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