How to Pay Off Your Mortgage Sooner
Your mortgage is probably your biggest financial commitment — but the good news is, with the right strategies, you can cut years (and thousands of dollars in interest) off your loan. Here are some practical ways to get ahead.
Make extra repayments
Even small additional repayments can reduce your principal faster. For example, adding just $100 extra a fortnight on a $500,000, 30-year loan at 6% interest could cut around 6 years off your loan term and save about $40,000 in interest. Just check that your loan allows extra repayments without penalty.
Make repayments fortnightly or weekly
Instead of monthly repayments, switch to fortnightly or weekly. This effectively means you’ll make the equivalent of 13 monthly payments a year instead of 12, helping you chip away at the balance faster.
Use an offset account
Link a savings or everyday account to your mortgage. Money in the offset account reduces the interest charged, while still giving you access to your funds when you need them.
Refinance to reduce your rate
Lowering your interest rate means more of your repayments go toward reducing principal. You can then use the savings to make additional repayments. Just be mindful of refinancing costs such as fees and valuations.
Put windfalls to work
Tax refunds, work bonuses, or inheritances can make a big difference. Applying these lump sums directly to your mortgage will bring down the balance significantly.
Avoid interest-only loans
If you’re on an interest-only loan, consider switching to principal and interest. Interest-only repayments don’t reduce the loan balance, which can cost you more in the long run.
Budget to increase repayments
Review your budget regularly and redirect savings from unnecessary expenses to your mortgage. Even small amounts add up over time.
Before making extra repayments
- Does your loan charge early repayment fees?
- Can you access extra repayments later through a redraw facility if needed?
- Are your extra repayments reducing the principal (not just paying future instalments)?
The above tips are general in nature and may not suit every borrower. Always check your loan conditions and seek advice before making changes.
Want to see how much faster you could pay off your home loan? Contact the Provide Finance team to discuss your finance options.