How To Pay Off A Home Loan Faster
Looking to pay off a home loan faster than originally planned? If you’re looking to curb your debt and interest accrual, this is one of the best days to do so.
Like it or not, banks are generally not in the business of making dreams come true. After all, they’re still essentially trying to run a business too, and where their income stems from charging interest.
In an effort to stimulate the global economy, interest rates are currently sitting at record lows. If you had the opportunity to potentially shave years – and thousands of dollars – off your loan or mortgage, wouldn’t you?
Ways To Pay Off A Home Loan Faster
While many of us are busy chasing the “Great Australian Dream” of home ownership, we’re often too busy to pay attention to the amount of interest that we’re actually paying on top of the loan amount.
An example of exactly why you shouldn’t ignore your interest rates is that it absolutely adds up in the long term. If you borrowed $500, 000 today for a home loan at 3% interest over 30 years, this actually adds up to just over $762, 000 over the three decade loan tenor – and if that doesn’t motivate you into trying to pay off a home loan faster, we’re not sure what else will.
So what are some insider tips on getting your loan amount down faster?
Start Extra Repayments – While this may seem like a no brainer, it requires a conscious decision (and effort) to prioritise your outgoing bills. Even by rounding up your repayment to the nearest $50 can ultimately save you thousands in the long term.
Get An Offset Account – An offset account is essentially a savings account linked to your mortgage, and the balance reduces the amount you owe on your mortgage. In turn, this lowers the amount of interest you pay, and helps you to pay off a home loan faster.
Avoid Interest Only Loans – With an interest-only loan, you only pay the interest on the amount you’ve borrowed and aren’t paying anything towards the actual loan itself, referred to as the principal. Ensure that you’re set up for a principal and interest loan to chip away at both.
Stop Paying Monthly – If you are paying your mortgage monthly, consider switching to fortnightly repayments. By paying half of the monthly amount every two weeks, you’ll make the equivalent of an extra month’s repayment each year – it all adds up.
Make A Budget – No doubt you saved religiously when saving to buy a house, but did that all go out the window once you actually got the loan? It might be time to revise your outgoings to see if there’s even an extra $50 a week, that could go towards your mortgage instead.
Check Interest Rates – Banks don’t call you to advise of a drop in interest rates – it’s up to you to ensure your finger is on the pulse when it comes to the latest decreases. Don’t be afraid to walk away to another provider if they are able significantly lower your mortgage terms.
Get A Loan Check Up – At least once a year, put aside time to meet with your bank manager or mortgage broker for a loan check up. Your financial position may not be the same as it was twelve months ago, and your loan should be regularly revised to ensure it’s the best fit for you.
Speak To A Professional
Now that you’re armed with the knowledge on how to pay off a home loan faster, it’s important to speak to a finance professional if you’re looking for more ways to make your money work for you.
Since their inception in 2012, Madd Loans have worked tirelessly in providing over 1700 Queenslanders with finance options to help turn their dreams into reality. With the entire brand being built on referrals, owner George Samios takes great pride in making the mortgage process both fun, educational and stress free – and he has a swag of awards to prove it.
An independent operator can be your greatest asset when it comes to navigating loan options, as brokers are there to make you happy – not the banks. To speak to a Brisbane based mortgage professional, please get in touch with the team at Madd Loans today to help turn your financial dreams into reality.