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10 Simple Steps to Pay off your mortgage sooner
Posted October 17th, 2010
and last modified May 26th, 2011
If you are paying off a home loan there can be many benefits to paying off your home loan faster than what is required. If you pay off your home loan faster than required then you will find that you will not only pay off the loan faster but you will save a lot of money. The interest that is charged to the account is calculated by the amount that owes on the loan. So if you make additional repayments you will get less interest charged to the account. When looking to pay off your home loan faster you should follow these 10 tips and rest easy.
10 steps to pay off your loan sooner
There are many advantages in paying off your home loan faster. To pay off your home loan faster you can:
- Hit the principal early. Interest rates are currently low on most of the loans that are on offer. This means that you will have less money being added to your account as time goes on. If you pay off the principal as much as possible and as early as possible you will find less interest will be charged to the loan.
- Pay fortnightly. While the interest that is charged to loans is added to your account monthly you will find that the interest is actually calculated on a daily basis. By switching to fortnightly or even weekly repayments you will have more money in the account and less interest will be calculated.
- Use mortgage offset. If you have savings that are not being used then you should look for a mortgage offset account with your loan. The mortgage offset accounts will reduce the amount that you will pay onto the loan by reducing the amount of interest that is charged.
- Save a bigger deposit. When you are saving for a home you should be sure to save as much as possible. If you have a bit of extra money then don’t borrow the full amount of the loan. This extra money that you borrow is just more money that can accumulate interest.
- Pay loan fees up-front. When you are applying for a home loan you will have to pay many fees. You should save up for these costs before you borrow because the more you borrow the more money you will have to pay in interest.
- Stick to a budget. One of the simplest tips but also one of the most effective. If you are able to live on a budget then you will be able to identify unnecessary costs that you have each month. These extra funds can be used on the loan.
- Forgo minor luxuries. If you buy a cup of coffee on the way to work every day because it is convenient or something similar you can save money by foregoing this luxury. Even though a coffee only costs $3 a day, which is $15 a week which adds up to over $750 a year. Put this money onto the loan and you will save a lot of money.
- Make extra repayments. If you are able to put just another $20 a week onto the loan this will add up to a lot of money over the life of the loan.
- Pay your tax-return into the home loan. If you get some extra money from a tax return or something similar put the funds onto the loan. Again, you will save a lot of money in interest.
- Monitor rates and shop around. Always try to get the best deal on anything you buy. Look around and see if there are cheaper options available.
If you are looking to pay off your loan faster then follow the 10 steps outlined above and start paying off you loan quicker. By doing this you will save a lot of money in interest that is not charged to your account.
Related posts:
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- Beat Rising Rates in 10 Easy Steps
- How to Use Additional Repayments and Redraw Loan Features to Pay Off Your Loan Sooner
- Using a Combined Account to Repay your Home Loan Faster
- How much can you Save with an Offset Account?
- How to Negative Gear with an Offset Account
- Citibank Standard Variable Offset Loan
- NAB Tailored Home Loan
- Westpac Premium Option Home Loan
- Redraw Vs Offset Accounts Explained
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