How to cut years off your home loan
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Thirty years. That’s the length of the average Australian home loan. Sounds like a lifetime doesn’t it? If you’d like to shave five or more years off the life of your home loan, put these tips into action.
Marry your mortgage to your income
Match your repayments to your income. If you’re paid fortnightly, make your repayment fortnightly. This helps chip away at the interest, saving you money over the long-term.
Use your lump sums
If you receive any lump sum payments like tax refunds or share dividends, put them into your home loan. The lump sum reduces the interest payable on the loan, meaning you pay off the principal much sooner.
Increase your repayments
If you have a variable loan, take advantage of rate cuts by continuing your repayments at the same level as when the rate was higher. An extra $20 to $50 each repayment can cut up to two years off your loan.
Use an offset account
A 100% offset account uses your savings account to offset your home loan. For example, if you have $50,000 in your savings account and a $150,000 loan, your savings are ‘offset’, meaning you only pay interest on $100,000.
Pay your wages into your offset
Have your wages paid into your offset account and leave them there for a few extra days each month. It might only save a few hundred dollars of interest each year but it all adds up.
Reassess your home loan
Compare your circumstances now to when you first took out your home loan. Is the loan still suitable? If not, it might be time to consider refinancing. Remember to assess the market before making changes by comparing Australia’s top mortgages.