Ways to pay off your mortgage faster
Many home owners at some point decide they want to pay off their home loan quicker and look for ways to achieve this and save money. Although there is no quick fix, there are many strategies that can save you money and help to repay the loan quicker. A Melbourne mortgage broker can offer some advice on the best strategies.
Some of the more effective ways to achieve this goal are making higher repayments than the required amount, making payments more often, and securing a lower interest rate and only paying for the feature that you use.
Secure a lower interest rate
It’s not all about the interest rate, but the rate that you pay does affect your home loan and a difference of just 0.5 per cent amounts to more than $100 per month on a $250,000 mortgage. By applying a lower rate to your home loan, you can save a substantial amount, and pay off the principal quicker by paying less in interest.
Making payments more often
If you pay your home loan more frequently than once a month, instead of 12 annual payments, you may make 13 repayments each year, and this can save some people up to eight years of the loan term. Many loan structures allow you to pay weekly or fortnightly. As interest is calculated daily, you save interest by paying this way because you are reducing the loan balance more frequently.
Making higher repayments
Home owners who have extra funds to direct into their mortgage are better off, as you reduce the loan quicker. If your loan allows you to make extra repayments then do it! At the beginning of the loan, you are mainly paying interest, and not principle. By paying more than the required amount you can reduce the interest due. Usually interest is calculated daily and then charged monthly. If you have extra funds to pay into your home loan this can save you considerable money.
Consider all lenders carefully
Not all lenders are created equally, the difference in fees and interest rates differ across the board, not to mention the level of service offered. Non-banks lenders have some great home loan products, some which have lower rate than the big banks, but some customers still prefer the security of a big bank with a recognised name.
Introductory fees and ‘honeymoon’ periods
You may want to take a look at taking advantage of introductory fees or ‘honeymoon’ periods. These are loans that offer you a low interest rate, sometimes as much as one per cent lower than other loans, for an agreed term, usually up to a year. Borrowers can save money by using this lower rate, however, these loans are often inflexible and do not allow for early repayments. Once the introductory period ends, the lean will revert to a higher rate, usually the same rate at the variable rate, so it is important to check this out before signing up for this type of loan.
The best thing you can do to save money on your home loan is talk to a professional who knows the market and understands your needs. That is why we recommend that you call Your Local Finance on  to talk more about your options.
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More in this Section | For further information and help with your personal mortgage | Applying for a home loan can be exciting and confusing | Your Borrowing Capacity | Why use a Melbourne Mortgage Broker |
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