Pay off your mortgage faster

Paying off your mortgage early will save you money and take a financial load off your shoulders. Here are some ways to get rid of your mortgage debt faster.

Pay off your mortgage faster

Switch to fortnightly payments

If you’re currently paying monthly, consider switching to fortnightly repayments. By paying half the monthly amount every two weeks you’ll make the equivalent of an extra month’s repayment each year (as each year has 26 fortnights).

Make extra payments

Extra repayments on your mortgage can cut your loan by years. Putting your tax refund or bonus into your mortgage could save you thousands in interest.

On a typical 25-year principal and interest mortgage, most of your payments during the first five to eight years go towards paying off interest. So anything extra you put in during that time will reduce the amount of interest you pay and shorten the life of your loan.

Ask your lender if there’s a fee for making extra repayments.

Find a lower interest rate

Work out what features of your current loan you want to keep, and compare the interest rates on similar loans. If you find a better rate elsewhere, ask your current lender to match it or offer you a cheaper alternative.

Comparison websites can be useful, but they are businesses and may make money through promoted links. They may not cover all your options. 

Switching loans

If you decide to switch to another lender, make sure the benefits outweigh any fees you’ll pay for closing your current loan and applying for another.

We can help you find a loan that may be more suitable than your current loan.

Make higher repayments

Another way to get ahead on your mortgage is to make repayments as if you had a loan with a higher rate of interest. 

This may not be possible while interest rates are rising. But when rates go down, repaying at a higher rate will help to pay off your mortgage sooner.

If you can switch to a loan with a lower interest rate, keep making the same repayments you had at the higher rate.

An offset account is a savings or transaction account linked to your mortgage. Your offset account balance reduces the amount you owe on your mortgage. This reduces the amount of interest you pay and helps you pay off your mortgage faster.

For example, for a $500,000 mortgage, $20,000 in an offset account means you’re only charged interest on $480,000.

If your offset balance is always low (for example under $10,000), it may not be worth paying for this feature.

Avoid an interest-only loan

Paying both the principal and the interest is the best way to get your mortgage paid off faster.

Most home loans are principal and interest loans. This means repayments reduce the principal (amount borrowed) and cover the interest for the period.

With an interest-only loan, you only pay the interest on the amount you’ve borrowed. These loans are usually for a set period (for example, five years).

Your principal does not reduce during the interest-only period. This means your debt isn’t going down and you’ll pay more interest.

If you’re interested in changing lenders and need help finding the right loan, contact us on 03 9553 0271.

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/home-loans/pay-off-your-mortgage-faster

Important note: 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.  Past performance is not a reliable guide to future returns.

Important
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Share this post

team

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.