Say farewell to your home loan faster
After the initial excitement of purchasing property has worn off it can be easy to slip into ongoing loan repayments without too much thought. But by doing this you could miss out on opportunities that could save you thousands and help pay off your home loan faster. Here are some tips on paying off your home loan as quickly as possible.
There’s no time like the present
You pay the most interest on your mortgage in the first few years because this is when the principle is at it’s highest amount. The sooner you’re able to make additional repayments and reduce your home loan principle, the better. By doing this you’ll reduce the interest you pay over the life of your loan.
Make extra repayments
Our situations are changing all the time so review your potential to make additional repayments regularly. You can pay off your loan sooner by increasing your repayment frequency, your repayment amount or in lump sums when you can afford it.
Increasing the frequency of your repayments to fortnightly or weekly intervals is the equivalent of making 13 monthly repayments a year. Over the years this additional repayment can make a significant difference to the life of your mortgage.
If your income increases or you’re able to make savings on your expenses, try to up your repayment amount. If your variable interest rate drops, try to maintain the same repayment amount chip away at your principle.
If increasing your ongoing repayments isn’t possible, try making additional repayments when you can. Using your tax return or a work bonus to make lump sum deposits are good examples of when you could safely make additional repayments.
Use a line of credit
If you’ve built up a reasonable amount of equity in your home, you can save on interest by using a line of credit. A line of credit allows you to draw funds out of the equity in your property as and when needed. Although it varies from lender to lender, usually a line of credit can be split with almost any home loan product.
The benefit of using a line of credit is that it gives you more flexibility in managing your repayments. Since the approved line of credit stays in your account until you need it, a major portion of your income stays in your loan account longer, and saves you interest.
Check in with your mortgage adviser
Changes in the market influence the competition between lenders so there are new products and offers becoming available all the time. Reviewing your home loan regularly can ensure you’ve always got a loan with the right amount of flexibility at the right price. If refinancing is an attractive option, we’ll also be able to make sure the costs don’t outweigh the benefits.