5 Tips for Paying Off Your Home Loan Faster
If you have a home loan, you might be wondering how to pay it off sooner and save money on interest. Here are some tips that can help you achieve your goal.
1. Make extra repayments. One of the easiest ways to pay off your home loan faster is to make extra repayments whenever you can. This will reduce your principal balance and the amount of interest you pay over time. You can make extra repayments as a lump sum or as regular payments, depending on your lender’s terms and conditions.
2. Increase your repayment frequency. Another way to pay off your home loan faster is to increase your repayment frequency from monthly to fortnightly or weekly. This will result in more payments per year and less interest accrual. For example, if you pay $2,000 per month, you will pay $24,000 per year. But if you pay $1,000 per fortnight, you will pay $26,000 per year.
3. Refinance your home loan. Refinancing your home loan can help you pay it off faster if you can get a lower interest rate, a shorter loan term, or more flexible features. You can shop around for different lenders and compare their offers to find the best deal for your situation. However, be aware of the costs and fees involved in refinancing and make sure they don’t outweigh the benefits.
4. Use an offset account or a redraw facility. An offset account is a savings account that is linked to your home loan. The balance in your offset account reduces the amount of interest you pay on your home loan. For example, if you have a $300,000 home loan and $50,000 in your offset account, you will only pay interest on $250,000. A redraw facility allows you to withdraw any extra repayments you have made on your home loan. You can use this money for other purposes or put it back into your home loan to reduce your interest.
5. Review your budget and spending habits. Finally, one of the most effective ways to pay off your home loan faster is to review your budget and spending habits and find ways to save more money. You can cut down on unnecessary expenses, such as eating out, subscriptions, or impulse purchases, and put the extra money towards your home loan repayments. You can also look for ways to increase your income, such as taking on a side hustle, selling unwanted items, or asking for a raise.
