Four ways to pay off your home loan faster
Become mortgage-free sooner.
Mortgage repayments are often the biggest monthly expense for homeowners.
If you’re one of the 35% of Queensland households paying off their home loans*, you may be looking for ways to reduce your debt faster.
RACQ Manager Banker to Member Initiatives Eszter Cathcart shared her top tips for paying off your home loan.
Lower the rate
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.
“The home loan market is extremely competitive at the moment so you shouldn’t have to look too hard to find a lower interest rate,” Ms Cathcart said.
“A lower rate can mean slashing years off the life of your loan and saving you thousands of dollars in interest.
“Keeping your repayment amounts the same at the new lower interest rate may also mean youpay your loan off quicker without sacrificing spending money.”
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 Cathcart said.
“Adding an extra $100 a month could mean cutting years off your home loan.”
Use MoneySmart’s mortgage calculator to find out how increasing your repayment amount could impact your loan.
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 Cathcart 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.”
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 Cathcart said.
“You’ll still be able to access the money whenever you need while it’s working to reduce your interest repayments.”
*Source: Australian Bureau of Statistics Housing Occupancy and Costs report.
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