How to pay off your home loan faster


Your home is probably the biggest purchase you will make in your life- it can feel like a 30-year long marathon. There are some simple ways to cut years off your mortgage, which we share in this article so you could become mortgage-free sooner than planned.

Small extra repayments

One of the most obvious ways to pay off your home loan quicker is to make extra repayments. Depositing lump sums, such as a tax return or work bonus, will always be beneficial, however it doesn’t always take large amounts or windfalls to make a substantial difference – planning for regular, small cash injections can have a great impact over the life of a loan.

Here is an example.
Kate has just been approved for a $500,000 loan with an interest rate of 3.50% p.a. over 30 years. If she paid an extra $50 per fortnight, she would save $27,182 of interest over the life of the loan, which in turn would shave 2.3 years off the loan period!

Switch your payment intervals

If you find that you don’t have the discipline to make extra repayments, then simply switching your payment structure can also help save years off your mortgage, as well as simplifying your finances if you are paid fortnightly.

For example, there are 12 months in a year but 13 four-week cycles, by switching your payment intervals from monthly to fortnightly, you are essentially paying off an extra month per year.

Make sure you have the right type of loan

Ensuring your loan allows extra repayments without penalty will help you to make the most of bonuses received or funnel small extra payments to reduce the loan principle more quickly, saving on interest immediately. An offset account will use your savings or living expenses to reduce your principle, while still allowing you to access these funds from a transaction account.

For example, say you have an investment property that is rented, and the mortgage repayments are set up under an interest-only arrangement. If you made the principle and interest repayment equivalent by putting surplus rental income into an offset account, any money sitting in the account will help reduce the loan period. This is because interest is calculated daily but charged monthly.

Although you may have to pay extra fees for the offset or redraw account, these may well be lower than the interest saved. Talking to our professional team of mortgage brokers is the easiest way to work out whether this option is financially sound.

Let us help you explore your options

Paying off your home loan faster isn’t necessarily difficult; however it does require financial discipline and expertise in ensuring the right loan features are in place. There may be other options we haven’t covered here, so please reach out and we’ll help you put a plan in place.

Disclaimer: Please note that the examples mentioned are indicative only, and outcomes will depend on your financial situation. It’s best to discuss this with your mortgage broker.