How To Pay Off Your Mortgage Quicker

Deposit:

Have as large a deposit on the home loan as you possibly can.

Shop around:

Always do your homework before you set up a home loan. Don't take the first loan you are offered, look around to see what other products are on the market. Check out their features, compare interest rates, fees & set up costs. Know what products you will need such as an offset account linked to your mortgage.

Even if you currently have a home loan, regularly shop around to see if there are other lenders who have a better deal. Always find out what fees you may have to pay upon exit of the current loan & setting up a new one & stamp duty. Also be aware that you may have to pay mortgage insurance.

Switch to fortnightly repayments:

Instead of paying your mortgage monthly, change to fortnightly. When you pay monthly, you are making 12 payments in the year, switching to fortnightly increases this to 26 payments a year.

Example:

Monthly $400  x 12 repayments = $4800 paid

Fortnightly $200 x 26 repayments = $5200 paid

Therefore you are making the equivalent of 1 extra monthly payment per year. This may not sound like much but it can really put a dent in your mortgage.

Offset account:

An offset account allows you to sit your money into an account which is linked to your mortgage. The balance of your offset account is offset against your mortgage.

For example: You owe $250,000 on your home loan & have $25,000 in savings which is put into your offset account you only pay interest on $225,000.

Always check interest for additional fees & interest rates if you are considering setting up an offset account & seek financial advise to see if this is right for you.

Make extra repayments:

It doesn't matter how small, every extra dollar you put on your home loan is working to reduce the life of the loan & save you interest. 

Fixed loans tend to put a cap on how much extra you can repay in a year (our loan permits $6000 in extra repayments or we 'may' incur a fee). Variable loans tend to offer you more flexibility in how much extra you can pay off.

If you receive an unexpected windfall such as an inheritance or tax refund, use it to make an additional payment on your loan.

Features to look for:

Redraw facility; This means that you are able to pay extra money into your mortgage & if you need them, you can redraw. These may come with restrictions such as having a minimum amount you can redraw, a fee to redraw or a limit to how often you can do this. But if you think you can put extra away onto your loan, but may need to draw on them in the future this is a good option. Remember that if you put this money into a bank account you would earn interest (generally this would be lower than the interest you are charged on your home loan), but you would also be taxed on interest earned. Whereas the interest you are saving on your mortgage is tax free.

If interest rates drop: 

If you have a variable home loan & the interest rate drops continue to pay the loan at the higher rate.

Summary:

With some homework prior to setting up a mortgage & some basic knowledge you can potentially save thousands of dollars & years off your home loan. There are many online calculators available for you to research different scenarios which will further enable you to make the best decision on what is right for you & your situation.

This information is general advice only & you should always consult with a bank & or financial advisor before taking on board any of the above advise.