Maximise Your Savings: Tips for Paying Off Your Australian Mortgage Faster

For many of us, a home mortgage represents our largest financial commitment, one that can stretch on for decades.

However, the term of a home loan doesn’t have to be as long as the contract suggests. By adopting some smart strategies, you can pay off your mortgage faster and alleviate this significant financial burden sooner.

 

Switch to Fortnightly Payments

One effective strategy for immediate savings is switching from monthly to fortnightly repayments of your home loan. By paying half of your monthly amount every two weeks, you end up making the equivalent of an extra month’s repayment each year. This simple adjustment can significantly reduce the interest you pay and shorten the life of your loan.

To illustrate this, take a couple with a $500,000 home loan at a variable interest rate of 6.66% per annum. Their monthly repayments are $3,213. By switching to fortnightly payments of $1,607, they would pay off their loan more than six years sooner and save around $160,000 in interest, assuming the interest rate remains constant for the term of their loan.

 

Make Lump Sum Payments To Your Home Loan

Utilising unexpected windfalls such as a redundancy payout, inheritance, tax return, or work bonus to make lump sum payments can also help you pay off your Aussie mortgage faster. While these payments won’t lower your regular repayments, they will reduce the principal amount, thus saving you on interest and shortening your loan term.

 

Consider Refinancing Your Mortgage

Giving your mortgage a health check might reveal better rates or lenders. Refinancing to a lower interest rate can save you money, and if you continue making the same repayments you were previously on a higher rate, you can reduce the loan term. If you have at least 20% equity in your home and a good credit score, you’ll have more leverage when negotiating with lenders. Be mindful of hidden costs such as application fees, valuation fees, and potential break fees. It’s best practice to engage with a professional to assist with this option who can negotiate on your behalf.

 

Utilise an Offset Account

Combining your savings and mortgage through an offset account can reduce the interest you pay. By keeping your savings or salary in an offset account with a redraw facility, you can lower your interest payments while still having access to your funds. The more you have in your offset account, the greater the savings and the faster you can pay off your loan.

 

Get a Specialist Mortgage, Talk to Us Today

Want to be mortgage-free sooner? Contact us at Specialist Mortgage. We can help you explore these strategies and tailor a plan that suits your unique circumstances, potentially saving you thousands and helping you pay off your home loan faster.

 

*Interest rates, fees, regular repayments, and potential savings will vary based on individual circumstances. All calculations made in the example were made using the moneysmart.gov.au mortgage calculator.