Simple changes and taking control of your home loan can result in serious savings
Tips to pay off your loan faster for serious savings
There's a real sense of pride and achievement in when you start to make some headway with your home loan. With Aussies experiencing record low interest rates, if you are in a good position financially, now is the perfect time to get ahead.
Simple changes and taking control of your home loan can result in serious savings and time off the life of your loan without having to win the lottery.
To help you move into a better position financially and start to get ahead, here are five smart ways to reduce the life of your mortgage and get serious about your savings.
Make extra payments
It sounds simple, but it's very effective and you can start small. Making more than the minimum repayment on your mortgage can cut years off your loan. On a typical 25-year principal and interest mortgage, most of your payments during the first five to eight years go towards paying off interest. So, anything extra you put in during that time will reduce the amount of interest you pay and shorten the life of your loan.
Be smarter with your repayments
Have you aligned your repayments with your salary? If not, you could be missing out. If you get paid fortnightly, change your repayments to fortnightly, too. This way, you'll pay more off your loan each year.
For example, if your monthly repayments are $2,000, by the end of the year, you'll have repaid $24,000 (not accounting for interest). If you change this to $1,000 a fortnight, by the end of the year you'll have repaid $26,000. This is because there are 12 months in a year – but 26 fortnights, effectively you squeeze in an extra month of payments each year.
This simple change can shave a couple of years off the life of your loan.
Look at lump sums
If you've received a lump sum payment – a tax return, work bonus, inheritance, or dividend payments – consider diverting these funds to your loan. The feeling of getting closer to being mortgage-free is unbeatable.
Take advantage of your offset
Adding an offset portion to your loan is a smart way of saving on your home loan. When you manage it well, you can save substantial amounts of interest. You can make deposits or withdraw from it as well as make purchases online or in person with a linked debit card. The big difference is that when you hold money in an offset portion over a period of time, you can reduce the amount of interest charged on your home loan.
Home loan health check
A quick home loan health check each year can make sure you are making the most out of the features available to you. Options like having a redraw facility or being able to make extra repayments could be worthwhile as your needs change through the years.
If you have any queries or want to chat more about the features of your loan, our Customer Care experts are on hand to help. Please contact Customer Care via email@example.com.
The opinions expressed in this article are the opinions of the author(s) and not necessarily those of Resimac. The above is general commentary only and is not advice tailored to any individual's financial situation. We recommend seeking advice from an insurance or finance professional before implementing changes relating to your finances.