Many home owners aim to get a lower home loan interest rate in order to minimise their mortgage payments. Some people want to pay off their debts more quickly so they can buy a home faster, while others want to pay as little each month as possible. The good news is that there are several methods you may use to lower your mortgage payments. Not all people are aware of the ins and outs of minimising home loan interest. If you want to know how to pay off your mortgage faster, then keep reading this blog.
Tips on Paying Off Your Home Loan Faster
Typically, when you take a home loan, you are given a 25 or 30 years loan term to pay off the loan. However, it doesn’t mean you have to stick to this loan term. Take a look at the following strategies that could help you pay off your mortgage quicker:
Choose the Appropriate Home Loan Type
Before you can think about paying your home loan faster, you must have a home loan that allows you to make additional repayments. For instance, with a fixed-rate home loan, you will be able to pay a maximum of $10,000 in extra repayments/year, which is a huge problem. However, there is a solution! You can choose a split-rate home loan. You’ll have a few options in split rates, such as (50/50, 80/20, 70/30, etc.)
Pay a Little Extra Repayments
It’s not always simple to do this. However, you risk having to make additional payments if you alter your repayment schedule. To answer your question ‘how can you pay off your mortgage quicker? ’, we would say, why not think about switching to a fortnightly schedule for your repayments? By doing this, you’ll pay off your loan more quickly each year. How? Let’s say your $2,000 monthly payment. You’ll have paid back $24,000 by the end of the year (without interest). By changing this to $1,000 every two weeks, you will have paid back $26,000 by the end of the year. This is due to the fact that there are 26 fortnights and 12 months in a year. This additional sum directly reduces the loan principal on which future interest will be computed. As the interest is less, extra repayments will help you pay off your mortgage sooner.
Use a 100% Offset Account
There is no doubt that 100% offset accounts would be the best method to pay off your home loan faster. You can deposit your gifts, pay, and tax refunds into your offset account. Every dollar in your offset account will minimise your balance on the home loan.
Keep Your Budget in Check
You must look at your budget. By doing a budget, you can make your money work for you to its maximum capacity. You can win this game by making yourself aware of your spending patterns. Moreover, you can follow the aforementioned tips if you are looking for how to pay off your mortgage faster in Australia.
The simple line is that, if you are able to, paying off your mortgage earlier, then it might be a wise decision for a variety of reasons. Over time, it might result in more money in your pocket and less anxiety over rate increases. The best part is that you won’t have to answer to a lender because you’ll own your home altogether. For many people, there is perhaps no finer feeling. It is a good idea to make your own calculations and enquire with your mortgage broker about any fees associated with the aforementioned tactics. For more individualised guidance, you can also think about meeting with a financial advisor.
The blog outlines a few tips on paying a mortgage quicker to save thousands of dollars. If you need help from an experienced home loan broker, you can get in touch with Home Star Home Loan, where we offer a variety of mortgage and home loan options after assessing your financial position.