It’s the great Australian dream to live mortgage free, yet for many Aussie families, this is considered an unattainable goal – or at least one they won’t achieve until they’re old and grey.
What if we told you paying off your mortgage doesn’t have to wait until you’re eligible for the old age pension? Australian home loan interest rates remain at historic lows, meaning you could be enjoying the freedom of having no mortgage in no time by following a few simple tips.
Get your note pads ready because we’ve complied our six tips for paying off your home loan sooner.
- Higher Repayments
An obvious, yet effective, approach. Can you sacrifice the Friday night take-out spend for a reduced mortgage balance? You will be surprised how much an extra $50 – $100 a fortnight/month will impact the term of your loan.
- Weekly or Fortnightly Repayments
Put simply: making more frequent repayments. Making extra repayments can take years – and thousands – off your loan. This is an avenue we strongly suggest exploring. Our team would be more than happy to discuss setting a realistic repayment budget if you are considering switching to a weekly or fortnightly plan.
- Interest Offset Accounts
An offset account is a savings account or transaction account linked to an eligible home or investment loan. The money you have in this account could offset the amount you owe on that loan, and you’ll only be charged the interest on the difference, so you Save on interest charges, which helps you pay your loan off sooner. Wages and income can also be deposited to this account and they generally only comply with variable rate loans. Still confused? We’d be happy to talk to you and explain how it works.
- Avoid Rate Cutting
When lenders reduce their interest rate to coincide with a fall in official rates, consumers often think to reduce their loan repayment. Instead, we suggest maintaining your original repayment, so you are still able to achieve a shorter loan term and save on interest.
- Pay both Principal and Interest
The lower repayments that come with an interest-only loan may seem like a good idea in the short term, but in the long run, it could end up costing you more because you’re only paying the interest initially and not reducing any of the actual mortgage. We would be happy to discuss these options with you.
- Get a Split Loan
Unfortunately, this doesn’t mean splitting your loan in half and forgetting about the rest. Split loans allow you to divide your mortgage with variable and fixed interest rates. For example, if you had a $500,000 mortgage, you can choose to “fix” the rate for $450,000 of the loan and the remaining $50,000 can be on a variable interest rate. This enables you to secure a low fixed rate for the main portion of your loan, whilst the variable allows you to make extra repayments and offset this interest rate with your savings.
We hope these tips have inspired you to make an effort to pay off your loan sooner than anticipated! Get in touch with our team and let’s make this dream a reality.