Expert Advice on How to Repay Your Home Loan Sooner and Save Money

When it comes to home loans, the repayment process can seem overwhelming, especially if you're a first-time buyer. However, with some planning and the right strategy, you can reduce the burden of your home loan repayments and pay off your mortgage faster. We explore simple home loan repayment strategies that can help you reduce the interest payable and pay off your loan quicker.

• Make extra repayments

Making extra repayments is one of the most effective ways to pay off your mortgage faster. Every extra payment you make reduces the amount of interest payable on your home loan and shortens the life of your loan. There are several ways you can make extra repayments:

• Pay more than the minimum repayment amount: If you have the financial means, consider paying more than the minimum repayment amount each month. This will help you reduce the interest payable on your loan and pay off your mortgage faster.

• Make lump sum payments: You can make a lump sum payment to your home loan at any time. This can be from an inheritance, tax return or bonus, and can help reduce the amount of interest payable.

• Use a windfall: If you receive a large sum of money unexpectedly, such as a gift or lottery win, consider putting it towards your home loan. It may not pay off your entire loan, but it can make a significant difference in reducing the amount of interest payable.

• Switch to fortnightly repayments

Another way to pay off your mortgage faster is to switch from monthly to fortnightly repayments. When you make monthly repayments, you make 12 repayments per year. However, when you switch to fortnightly repayments, you make 26 repayments per year. This means you are making an extra month's payment every year. Over the life of your loan, this can significantly reduce the amount of interest payable and help you pay off your mortgage faster.

• Use an offset account

An offset account is a savings account linked to your home loan. The balance in your offset account is used to offset the interest payable on your home loan. For example, if you have a home loan of $500,000 and an offset account with a balance of $50,000, the interest payable on your home loan is calculated on a balance of $450,000.

Using an offset account can help you reduce the amount of interest payable on your home loan and pay off your mortgage faster. It's important to note that not all home loans offer an offset account, and some may charge a fee for this feature.

• Refinance your home loan

Refinancing your home loan can help you reduce your monthly repayments and pay off your mortgage faster. If interest rates have dropped since you took out your home loan, you may be able to refinance to a lower rate. This can help you reduce the amount of interest payable on your loan and reduce your monthly repayments.

Alternatively, you may be able to refinance to a shorter loan term. For example, if you have a 30-year home loan, you may be able to refinance to a 25-year loan term. This can help you pay off your mortgage faster and reduce the amount of interest payable.

It's important to note that refinancing your home loan can involve fees and charges, so it's essential to do your research before making any decisions.

• Other

There are other debt repayment strategies that we consider with our clients, however we look to tailor these approaches to meet their underlying goals and objectives.

These include, utilising salary sacrifice arrangements, using superannuation, using debt recycling strategies, investment properties, gearing or borrowing to invest, to name a few.

It is critical to have a debt repayment strategy that will map out the steps required to achieve your goals.