How to pay off your home loan faster and save big bucks

Reducing the life of your loan isn’t difficult; there are many simple things you can do to cut years off your mortgage. Here are some tips that will help you be mortgage-free sooner, from a client interview.

Small extra repayments

One of the most obvious ways to pay off your home loan quicker is to make extra repayments. Depositing lump sums, such as a tax return or work bonus, will always be beneficial, however it doesn’t always take large amounts or windfalls to make a substantial difference – planning for regular, small cash injections can have a great impact over the life of a loan.

“Let’s say you pay an extra $50 a fortnight on a $500,000 loan, that saves you $32,000 of interest over the life of the loan which in turn will save you just over two years,” explains the finance broker. “That’s only $25 a week.”

Switch your payment intervals

If you find that you don’t have the discipline to make extra repayments, then simply switching your payment structure can also help save years off your mortgage, as well as simplifying your finances if you are paid fortnightly.

“Because there are 12 months in a year but 13 four-week cycles, by switching your payment intervals from monthly to fortnightly, you are essentially paying off an extra month per year,” says the finance broker.  “All you have to do is pay half your monthly minimum payment each fortnight to save $56,000 interest and pay off your mortgage more than 5 years faster”

Make sure you have the right type of loan

Ensuring your loan allows extra repayments without penalty will let you to make the most of bonuses.  Interest expense is calculated by banks on a daily basis, so funnelling extra payments into a loan saves interest immediately, as does an offset account, which will use your savings or living expenses to reduce your principle, while still allowing you to access these funds from a transaction account.

“A popular loan option available now (April 2019) is fixed for 3 years at rate 3.65%, with no ongoing fees and a 100% offset account attached.  Because interest is calculated daily but charged monthly, any money sitting in the offset account will help reduce the loan interest expense and term remaining.  This option allows certainty of minimum bank repayments and the ability to pay your loan off faster”

Note at many banks you may have to pay extra fees for an offset account or for using redraw, these costs need to be compared to interest saved. Talking to a finance broker is the easiest way to work out what options are financially sound for you.

Paying off your home loan faster isn’t difficult, however it does require financial discipline and expertise in ensuring the right loan features are in place. Ask your broker to match you to your perfect loan.


Integrity Finance Australia– Changing Lives

Daryl Borden, your Dingley Village Mortgage Broker, Ph. 03 9511 8883 ACL 392184