Taking out a home loan is a major financial commitment, and represents years of careful planning and money management in the hope of one day reaching the dream of paying it off.
How long it takes you to work off that debt all depends on the effort you’re willing to make. If you adopt some smart strategies, you can easily cut years off your mortgage and get it off your back much faster!
So here are some quick tips on how to pay off your home loan quicker.
Make the most of your finances
Many people don’t realise that if you make the most of all your sources of funding, such as your savings account and wages, you can go some way toward paying off your home loan more quickly.
One of the easiest ways you can combine your funds to streamline your mortgage repayments is by taking out an offset account. These accounts link your home loan to your normal savings account so that any money that would otherwise be sitting idly in your savings will actually be working to reduce the interest you pay on your loan.
You can also arrange for your income to be deposited straight into your offset account to reduce your interest even further.
Pay more often
Instead of paying monthly, you can try switching to fortnightly repayments. The logic behind this is based on some simple mathematics – as there are 26 fortnights in a year as opposed to 12 months, you’ll essentially be paying 13 months’ worth of repayments every year. An extra month may not sound like much of a difference, but you’re likely to shave significant time off your loan as the years go by.
Consolidate your debts
If you have a range of loans in addition to your mortgage, for example for your car or credit cards, a sensible tactic is to consolidate all your debts under your home loan.
This is because the interest rate for your home loan is likely to be much lower than for these other loans, so it makes sense to pay off all your loans at the lowest possible rate. Doing so will also help keep you protected if interest rates start to rise across the board, as you’ll still be paying off your debts at the rate of your home loan.
ANTHONY WALKER- Owner/ Manager BOQ Penrith