5 ways to truly own your home in record time
Imagine living in a space that’s truly yours, while also having the freedom to use your money however you please. It might sound like a far off dream, but being mortgage-free might be closer than you think. In this article, we’ll share some practical tips to get you on your way to paying off that home loan sooner.
1. Make sure you’ve got the best rate
An oldie but a goodie. As you’ll remember from when you first took out your home loan, a lower interest rate means lower interest charges over the life of your loan. This means more of your repayments are going towards paying down the principal balance of the loan, rather than just paying interest.
But remember, interest rates change over time. It’s important to keep tabs on your loan over time to make sure you’re still getting a good deal. If you’ve got a home loan with us, you can rest easy because we’re committed to keeping you on the best interest rate we can. But even so, it’s a good idea to check in every few years to make sure you’re on the right loan for you.
2. Set up an offset account
An offset account is a type of transaction account linked to your home loan. Instead of earning interest on the money saved in the account, the funds offset, or reduce, the interest you pay on your loan. This means that the more money you have in your offset account, the less interest you will pay on your home loan. Adding an offset account to your home loan can significantly reduce the amount of interest you pay over the life of the loan, while making sure you have easy access to your savings.
Lucky for you, we know the power of a good offset account. That’s why you can add up to eight linked offset accounts to any of our variable or fixed home loans – you can learn more about that over here.
3. Make repayments more often
Changing your repayments from monthly to fortnightly or even weekly is a simple strategy with big potential. By paying half of your monthly repayment amount every two weeks, you end up making an extra month’s worth of repayments each year. Even better if you choose to make your repayments on a weekly basis.
How does it work? We’re glad you asked. Interest on your loan is calculated daily, but it’s added to your balance on a monthly basis. By chipping away at your balance more frequently, you’re reducing the amount of interest that accrues each day. It may not seem like a big difference, but over time it can add up to thousands of dollars in savings.
Plus, changing to weekly or fortnightly means you can align your repayments with your pay cycle to make budgeting that little bit easier.
4. Increase your repayment amount
Putting a little extra money into your home loan with every repayment is another great way to shorten the length of your loan. By paying more than the minimum, you’ll make a bigger dent in the principle of your loan, as well as the interest you’ll pay in the long run. While this approach would mean a small increase in expenses, you’ll be rewarded by owning your home outright even sooner.
If you’d like to see how adjusting your repayment amount could influence your home loan, have a play around with your own numbers in our home loan repayment calculator.
5. Make extra repayments
With a home loan, every little bit counts. If you’re able to make extra repayments, definitely think about doing so. Even small amounts can make a big difference over time, especially when it comes to the amount of interest you pay. That way you’ll be able to chip away at the principal balance of your loan, which will ultimately help you pay it off sooner.
If you don’t have an offset account, a redraw facility will give you a bit more flexibility when it comes to extra repayments. That way, you can always access your extra repayments if you need some cash down the road.
You can always try our extra repayments calculator to see what difference making additional payments would make for you.