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Your home is probably the biggest investment you will make in your life, and a debt that most people would like to pay off as quickly as possible. Here are our hints and tips to pay off your home loan sooner:

1. Make more frequent payments

One of the simplest and best strategies for reducing the term and cost of your home loan is to make your repayment on a fortnightly rather than monthly basis. As there are 26 fortnights in a year, you will essentially pay for 13 months instead of 12 months and it could make thousands of dollars and years of difference over the term of your loan.

2. Make extra repayments

Try to make an extra repayment or two when you’ve got some spare cash. Maybe that tax refund you were thinking about spending?

3. Pay more than the minimum repayment

Even the smallest amount you can afford to pay each fortnight will help you get ahead on your home loan repayments. Even if it is only $20, a small amount will make a huge difference over the long term.

4. Have an offset account

Offset accounts are a feature of certain loan products that allow you to use savings to reduce the balance of your loan. Instead of receiving interest on the savings account, the interest payment due on the loan is calculated only on the net balance of the loan less the savings account, thereby reducing your interest repayments.

5. Choose your loan carefully

There are so many loans with loads of different features, and while interest rates are important, they’re not always the deciding factor in choosing a loan that is right for you. Annual or monthly fees can make a huge difference to the amount you pay over the life of the loan. Also, you need flexibility and to make sure you aren’t being charged fees for these features to be able to pay your home loan off faster.

I recommend avoiding honey moon rates. The interest rate will be very low for a set period of time at the start of the loan term (usually one to two years) in order to encourage you to apply and borrow with that lender. Once the prescribed period is over, the interest rate usually reverts to the ‘standard variable rate’ that is actually much higher than what most borrowers pay as their effective rate these days.

That’s why it’s best to use a professional finance broker to find the best loan for you.

6. Don’t be scared to switch banks

It’s a very competitive lending environment out there and banks are always looking for new business. At any one time some are more aggressive than others or are offering new loan products or special deals.

You can switch with the same lender, or change to a new lender altogether. That’s where your broker will work with you to make sure you don’t jump the gun. They can easily check out what it will cost you to switch loans. For example, there may be exit fees payable on your old loan and establishment fees on your new loan.

And don’t be scared to move away from the big 4 banks. You’ll find some of the smaller lenders are offering a top deal.

7. Consider taking a shorter loan term, e.g. 25 years

A very obvious way to pay a loan off faster! But of course it means your repayments will be higher. If you can afford the repayments, then do you really need to take out the loan for 30 years?

8. Skip those minor luxuries

Yes this is the part that is hard to read. Boring but necessary! Reducing or giving up your favourite indulgent snack, coffee, cigarettes or alcohol and taking your lunch from home are simple ways to save money (plus your body will thank you for it). These savings can be used to make thousands in extra repayments off your loan. Cutting down as little as $100 a week on your expenses will see you reap huge financial benefits.

9. Don’t forget about your home loan

Like with any long-term commitment, most of us tend to let our home loan tick along, make repayments via direct debit and pretty much forget about it. This attitude can be a big mistake. But that’s where a good broker can provide a valuable service. You can forget about your home loan knowing your broker will keep in touch with you regularly if rates change or if new products and changes in the market create opportunities to negotiate a better deal and get ahead of the game. If it has been two years since you took out your current home loan and your broker hasn’t been in touch, that’s not good enough. Get in contact with Luxe today for a complimentary home loan review.

10. Find out if your profession gets you a discount

Various lenders offer “professional” packages for loans over a certain amount, which can be as little as $150,000. These packages offer discounts and reductions to specific professional groups or members of professional organisations. Ask Luxe Financial if your occupation qualifies you for any discount. You might be pleasantly surprised.



Luxe Financial – your local mortgage broker for Wollongong, Illawarra & South Coast. We’ve got your entire home loan and commercial finance needs covered!

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