Strategies for paying off your home loan faster

By Anouska Linz
Putting extra money towards your home loan cannot only reduce your mortgage term, but you could save a substantial amount of money on interest. You don’t have to make dramatic budget changes; even small, consistent extra repayments can make a difference over time. Some strategies you may want to consider include:
  • It doesn’t matter how long you’ve had your home loan for, you should regularly compare it with other products on the market. You may find that another lender can offer a more competitive option that suits your needs better.
  • An offset account is a great money-saving feature and many lenders offer this with their home loan products. An offset account acts as a transactional account which is linked to your mortgage and if you deposit extra funds into the account, it will decrease the loan balance that interest is calculated on and therefore will reduce the amount of interest you owe. However, you are still able to withdraw this money to use for other expenses.
  • Although you are able to withdraw any extra funds you put into your offset account, the longer you can keep the money in the account, the less interest you will be charged. Also check if the lender charges withdrawal fees, as you could end up spending an unnecessary amount of money on fees.
  • Consider having your employer transfer your pay straight into your offset account. That way, you are reducing the amount of interest you owe straight away and can then withdraw money when you need to.
  • If you are looking to refinance to a more competitive home loan, be wary of introductory deals such as honeymoon rates. Although these rates may be very competitive, you may find that after the introductory term finishes, you could be faced with a higher interest rate. Don’t forget that these types of deals are designed to draw in new customers for lenders and you need to consider what the loan is going to cost you over the next 20-30 years.
  • One-off lump sum payments are a great way to pay a chunk off your mortgage instantly. Extra funds from a work bonus, tax return or a gift can help reduce both the principal and interest owing.
  • Consider taking on a second job. Even if you work a few extra hours a week and contribute all of the income to the mortgage, you will help reduce the amount quickly.
  • The repayment frequency may also influence how much you pay off each year. For example, some home loan fortnightly repayments are decided by dividing the monthly repayment in half and then repaying every two weeks. By doing this, you end up paying the equivalent of one extra monthly repayment each year. However, you will need to check how your lender calculates the repayments as their calculation method may be different and you may end up repaying the same amount, despite what your frequency is. 
  • Try to avoid taking on more debt if you are set on paying off your home loan early. Expenses such as credits, other loans, Foxtel and phone contracts may seem like small expenses, but each of these commitments means you have less money to pay off your mortgage.
  • Kick as many bad habits as you can. Some of the simplest things could be what is costing you. For example, using ATMs that do not belong to your financial institution means you will have to pay an ATM fee or even just missing bill deadlines could mean you will be charged a late fee. All of these extra fees may seem insignificant, but over time they do add up.

Anouska Linz is Manager, Online Sales at State Custodians and has over 10 years’ experience in financial services, both in broking and banking. Holding a bachelors degree in accounting, Anouska quickly discovered a love for mortgage lending and assisting people to achieve their home ownership goals. She leads a team of highly experienced lending specialists who are passionate about finding lending solutions which result in real wins for the customer. She is also a massive netball fan.

For more information on our home loans, visit or call 13 72 62.