More money in your pocket, by paying off your mortgage faster

For most of us, our mortgage is our biggest financial burden – and one that’ll be with us for decades. However, it’s important to remember that the life of a home loan doesn’t need to be as long as the contract suggests; you’re free to pay it off faster and take that financial load off your shoulders sooner.

Chipping away at your mammoth mortgage takes a committed plan, so here are some savvy ways to be debt-free earlier than originally planned.

More money in your pocket by paying off your mortgage faster

Consider making fortnightly payments

If you’re paying your mortgage off monthly, consider switching to fortnightly repayments. It may seem like a trivial move, but by paying half the monthly amount every two weeks you can actually make the equivalent of an extra month’s repayment each year. This small move will compound over the life of your loan, reduce the interest paid and allow you to pay off your principal sooner.

Case study

Peta and Alex have a new home loan of $500,000 at a variable interest rate of 6.66% per annum and they’ve chosen to repay principal and interest over a 30-year term. Their monthly repayments at that rate would be $3,213 (not including additional fees and charges).

But if the couple decide to make fortnightly repayments of half their original monthly repayment ($1,607) they would be paying more off their mortgage by the end of the year, i.e., less interest therefore saving them money.

In the long term, they’d pay off their loan more than six years sooner and save around $160,000 in interest (if their interest rate remained the same for the life of the loan).

Make a lump sum payment

A one-off lump sum payment like a redundancy cheque or inheritance as well as semi regular additional payments such as a tax return or work bonus – especially during the first few years of a typical mortgage – could carve years (and cash) off your mortgage and help you get debt-free faster.

It’s important to note that placing a lump sum payment on your mortgage won’t lower your repayments. However, it will help you save on the interest component and lower the total amount of time left on your home loan.

Look at refinancing

By giving your existing mortgage a health check, you could find there is a better rate, or even a better bank, out there for you. Just because you signed on the dotted line for 20, 25 or 30 years doesn’t mean you need to stick with the same lender.

Refinancing could get you a lower interest rate which would ease the hip pocket, but if you can manage to keep making the higher repayments moving forward, you’ll end up reducing the life of your loan.

If you have at least 20% equity in your home and a great credit score, you’ll have more bargaining power. Carefully read the fine print to be aware of hidden costs like annual fees or ‘honeymoon’ interest rates that could change after an introductory period, application fees, valuation fees and break fees.

Get into an offset account

You don’t need to keep your savings and your mortgage separate, in fact, they work better together. By putting your savings or even salary in an offset account with a redraw facility, you can reduce the amount of interest you pay but still have access to your funds if you need them.

Ultimately, the more money you keep in your offset account, the bigger the savings and the faster your loan will be paid off.

To work out how you could be mortgage-free sooner while shaving thousands off your home loan talk to us today.

NOTE: Interest rates, fees, regular repayments, and the potential savings will vary depending on your unique circumstances. All calculations have been calculated using the moneysmart.gov.au mortgage calculator.

Important: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

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CFP® Dip FP
Authorised Representative 298494
Interprac Financial Planning Pty Ltd 

Darryl Jopling

Senior Adviser

I have worked in the financial services industry since 1982 and as a Financial Adviser since 1999.

I have worked for large Financial Planning businesses, Membership based organisations and looked after the financial planning needs of clients within an Accounting Practice before starting my own business.

I am married, have 4 older children and a grandson and I am keen golfer with mixed results like many .

I have been through many of the strategies I talk with clients about myself and with my family.

I have been through the journey of seeing my parents move into Aged care and negotiated the difficulties and pitfalls of understanding the system for them and this gives me an excellent insight into what is required to assist families at this difficult time.

In a previous roll I used to run retirement seminars looking at Centrelink and Retirement Incomes and how to make these work for you. I have helped many of my clients with Aged Care advice when their parents needed to move into Nursing Homes. For many clients I assist them with superannuation, building wealth and protecting their loved ones with insurance.

I am supported by his, Licensee, Interprac Financial Planning’s in-house resources and ongoing technical, systems and training.

I am committed to understanding your needs and identifying strategies and products to help you achieve your goals.

My guiding principle as an Adviser is to design plans which help to provide my clients with clarity of purpose and the opportunity to build a solid financial foundation.
I will take the time to listen, explain things clearly and keep you informed throughout the advice process.

My experience is complemented by professional qualifications including:

  • Certified Financial PlannerTM Professional
  • Diploma of Financial Planning

At Choice Financial Advice we work with you along the way on life’s journey.

Whether you are getting married, starting a family, embarking on the trip of a lifetime, planning to enjoy your years after work or assisting elderly parents with Aged Care and Nursing Home placements, we can help.