There are numerous advantages to paying off your mortgage early. Not only will you be free of one of your largest debts, but you will also pay less interest in the long run.
We’ve compiled a list of eight hacks you can use to pay off your mortgage early in this article. Whether you own an investment property or a primary residential property in Sydney , there is almost certainly something you can do to accelerate your mortgage repayment.
Place Your Funds In An Offset Account Â
An offset account is similar to a savings account that is linked to your mortgage balance. It is fully transactional, and you can easily withdraw funds for everyday expenses.
Any funds in your offset account reduce the interest charged on the principal balance of your loan.
For example, if your Sydney home loan balance is $300,000 and you have $50,000 in your offset account, you will only be charged interest on the first $250,000 of your loan.
You may find yourself with more money to put towards home loan repayments because you will be paying less interest. This will allow you to pay off your mortgage early.
Negotiate A Lower Interest Rate Â
A higher interest rate will result in higher monthly payments. When you pay less interest each month, you may be able to increase the amount you pay toward your principal.
So aim for a lower rate while maintaining the same repayment amount.
While refinancing to a lower interest rate may appear to be a lot of work at first, it can save you thousands of dollars over the course of your loan. Use our Mortgage Repayments Calculator to see how much you could save with a lower interest rate.
Furthermore, you may not even need to refinance to get a lower interest rate. All you have to do is call your lender and ask them to match your interest rate to the rate offered to new customers.
They are likely to comply if you have been a responsible borrower. At a time when lenders are competing for customers, customer retention is critical.
If you don’t want to increase your monthly minimum repayment, you can make extra loan payments on your duplex home. The sooner you repay your loan, the less interest you’ll have to pay overall and this is the best way to pay off your mortgage.
Make More Frequent Mortgage Payments Â
Did you know that making fortnightly repayments instead of monthly ones can result in an extra month’s home loan repayment each year?
This may not appear to be significant, but that is precisely the point. You’ll be repaying your loan a little faster without even realizing it!
Consider Making Additional Payments Â
Making extra payments on your custom home loan may seem obvious, but it is a best way to pay off the mortgage sooner. Extra payments do not have to be made on a regular basis.
Consider putting any extra money you receive, such as a work bonus, a tax refund, or an inheritance, towards your mortgage.
Another advantage of making extra payments is that you will pay less interest because you are paying off your loan faster.
Keep in mind that if your interest rate is fixed, you may not be able to make additional payments without incurring penalties. When fixed-rate borrowers make extra payments or pay off their home loan early, lenders frequently charge break fees
Create A Redraw Facility To Access Your Extra RepaymentsÂ
Consider using a redraw facility if you want to make extra payments but don’t want the money to disappear into the mortgage abyss.
Any additional repayments you make on your home loan are pooled in a redraw facility, allowing you to access these funds when you need them.
Although lenders frequently charge a small fee for withdrawing funds from your redraw, it can be useful for funding renovations and other larger expenses.
Shorten Your Loan Repayment Period Â
Your personal life circumstances are likely to have changed since you first secured your home loan.
If you’re in a better financial situation, you might consider shortening the term of your loan. For instance, from 30 to 25 years.
This will necessitate an increase in your minimum monthly repayment amount. If you can afford the increase, you could end up paying off your loan years sooner and save thousands of dollars in interest.
Avoid Interest-Only Loans Â
Even though interest-only loans can be beneficial to many homeowners and investors due to tax advantages, they will not allow you to pay off your mortgage early.
To pay off your home loan faster, you must make payments toward the principal (i.e., the loan amount) rather than just the interest accruing on top of it.
Be Cautious When Refinancing Â
It’s a good idea to look into refinancing your Sydney home every couple of years. While you may not need to refinance on a regular basis, it is critical to ensure that your interest rate is still competitive and that your home loan meets your current needs.
When refinancing, keep the following in mind:
- Check that you are not paying for any features that you are not using. Offset accounts are fantastic, but the annual fee is a waste of money if your offset is empty.
- With so many lenders offering low- and no-fee loans, it’s important to make sure you’re not overpaying in fees and charges
- When refinancing, take care not to restart your loan term. When you refinance, some lenders will automatically start a new 25-30 year loan term, even if you only have 18 years left on your current loan. When it comes to saving money on interest and owning your home outright sooner, the shorter your home loan repayment term, the better.
- Consider whether you are satisfied with your current lender’s customer service.
- Don’t be afraid to switch lenders if you can get a better deal elsewhere. Most lenders do not value customer loyalty as highly as you might believe.
