Home News 5 ways to pay off your mortgage in record time

5 ways to pay off your mortgage in record time

Font size :

Purchasing a home can be an intimidating yet rewarding experience. Intimidating because you will be weighed down with a mortgage debt that can feel like it will never end, and rewarding because at the end, not only will you have a “castle” to call your own, you will also have a solid financial springboard to catapult your wealth to new heights.

Of course, while outright home ownership is what we all strive for, many of us struggle to pay off our mortgage debt. This doesn’t have to be the case. If you’ve just taken out a 25 or 30 year mortgage, by being disciplined and chipping away at the loan repayments in the early years, you could cut as much as 10 years off the life of the loan.
 
Here are five ways that, when incorporated together, can help you pay off your mortgage in record time:
 
1. Have a loan that suits
There are many home loan options out there and not all of them will work in your favour. As a rule of thumb, look for a mortgage loan that carries a competitive interest rate, flexible repayment options and minimal fees and penalties. In addition, go by the loans ‘comparison rate’ rather than the ‘advertised rate’. The comparison rate will show you what you will really pay including any interest and fees.
 
2. Switch to fortnightly repayments
Switching your monthly repayments to fortnightly repayments equates to making 13 months’ worth of repayments a year rather than twelve. Over a 30 year period, paying fortnightly calculates to paying off your mortgage roughly two and half years earlier. 
 
3. Pay more, pay often
The primary method to paying off your mortgage sooner is to pay more. Consider adding any windfall, such as your tax return, to your mortgage. The more you put into your mortgage, the faster your loan will be paid off. Whenever you have a little money to spare in your budget, put it towards your loan. It’s worth noting though that most fixed rate loans have restrictions on how much you can repay, so be sure to keep this in mind when planning any additional repayments.
 
4. Take advantage of an offset account
Most variable interest rate loans have the ability to set up an offset account and they are a great way to reduce the amount of interest you will pay through your savings. 
 
Here’s how they work. If your home is worth $300,000 with interest charged at 6% and your home loan has an offset facility with a balance of $20,000 – instead of receiving interest on the deposit of $20,000 and paying interest on the full balance of the mortgage – the interest is only charge on the first $280,000 of the mortgage ($300,000 less $20,000).
 
5. Refinance
Sometimes saving thousands of dollars can be as simple as asking your lender for a lower rate or switching from a variable loan to a fixed rate loan. By switching to a lower rate, you could save on your repayments – helping you pay off your loan sooner. 
 
We all dream of owning our home outright and by being disciplined and taking these simple steps you can go a long way to achieving that dream.  As always, it is best to speak to a mortgage broker, like Aussie, or a financial adviser to find the best solution for your needs.

 

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan

Andy Wright

Andy is the National Head of Product for Aussie Home Loans.  Andy has recently joined Aussie after spending the past 10 years in CBA’s retail banking business leading product and sales teams. Andy is a qualified Chartered Accountant with a Commerce/Law degree from UNSW and an MBA from INSEAD in France.

www.aussie.com.au

Mortgage News and Articles

Choosing the right mortgage is hard for many first-home buyers Choosing the right mortgage is hard for many first-home buyers

Many feel overwhelmed by the sheer range of products and interest rates on offer, a new survey reveals Read more

Mortgage applications drop in second quarter Mortgage applications drop in second quarter This marks the “beginning” of a downward trend, says Equifax executive ... Read more

To break monopoly, many smaller lenders could become banks To break monopoly, many smaller lenders could become banks The proposed change could break the Big Four’s monopoly over the mortgage market and help families get cheaper home loan rates ... Read more

Borrowing against the home: A strategy to pay for aged care Borrowing against the home: A strategy to pay for aged care Such debts can generally be divided into long-term and short-term loans ... Read more

More mortgage news and articles

Sponsored Links

Monday, Jul 24, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Whether you're a first homebuyer, looking to refinance, or investing, it's important to have the right loan for your needs. Just fill in a few details below and one of our trusted mortgage advisers will contact you.

A quick & easy way to find the right home loan
  • Purpose of mortgage
  • Household Income
    $
  • How much do you want to borrow?
    $
  • How much deposit do you have?
    $
  • How much is your house worth?
    $
  • How much do you still owe on your mortgage?
    $
  • What type of mortgage do you have?


  • How much is your new home?
    $
  • How much do you want to borrow?
    $
  • How soon do you want a mortgage?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords