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SEVEN TIPS TO KNOCK YEARS OFF YOUR HOME LOAN

The longer the term of your home loan, the more you'll pay on interest – that is a simple fact. Although having a home loan to purchase property can be a good way to get ahead financially, it pays to have a sound strategy to pay off your mortgage as quickly as possible.

Can you imagine being mortgage free? Wouldn't it be nice not having to pay your bank more money on interest rates? Can you think of what you could do if you didn't have to pay your mortgage?

The good news is that the power to make this happen faster is in your hands. Getting a loan shouldn't be about 'set and forget', there are always things you can do to help pay off your loan faster. Here are a few tips to fast track your financial independence:

1. Make your repayments as high as possible

Why not start paying off your loan as though you were on a higher fixed rate even though you're not? You don't have to wait to fix at a higher repayment, you can start making higher repayments now if your loan has the flexibility that allows you to do it.

The same applies for when interest rates fall, although it may seem tempting to pocket the difference, keeping your repayments at the previous level will shave a significant portion of principal off your loan.

Another way to do this is by rounding up your repayments. For example, if you are paying $794 a fortnight, why not make those payments $800?

2. Have a loan with a balance of floating and fixed interest rates

Splitting your total borrowings between floating and fixed rates gives you the flexibility to make extra repayments on the portion of your loan on floating, while still having certainty on the portion of your loan that has a fixed rate. You can also have different maturities, like a portion of your loan fixed for 2 years, and another portion fixed for 5 years. How you split your loan will depend on your individual circumstances and your goals.

3. Pay loan fees and charges upfront

Pay establishment fees and legal fees up front rather than capitalising them into your loan. This will save you thousands of dollars in interest over the loan term.

4. Stick to your budget

A mortgage is a big part of your life - you want to have a plan to make sure you pay off as much as you can, but you also want to be able to enjoy the lifestyle you want. After all, you'll be paying your loan for many years to come. Find the right balance of reducing your mortgage while still enjoying life. The best way to do this is to have a plan and a budget, and stick to it.

5. Align your repayments with your income cycle

If you have a revolving credit facility, where your salary is directly credited to your loan, changing your repayment dates to match your income cycle helps you to take advantage of the money sitting in your account for as long as possible.

6. Pay any inheritance or savings straight into your mortgage

Whenever you have some extra money, don't put it in the bank where it will earn little interest that will then be taxed. Put it directly into your mortgage and take it back when an expense crops up if you need to.

7. Have the right strategy that will help you get out of debt faster

There are many ways to knock years off your loan, but sometimes it seems hard to figure out what will work for you. A home loan tailor-made for your circumstances and a long term plan are the best ways to pay off your loan as fast as you can while still enjoying the lifestyle you want.